Salvatore Ferragamo (BIT:SFER) Has Debt But No Earnings; Should You Worry?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Salvatore Ferragamo S.p.A. (BIT:SFER) makes use of debt. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is Salvatore Ferragamo's Net Debt?

As you can see below, Salvatore Ferragamo had €90.8m of debt at June 2025, down from €104.6m a year prior. However, it does have €206.7m in cash offsetting this, leading to net cash of €115.9m.

How Healthy Is Salvatore Ferragamo's Balance Sheet?

According to the last reported balance sheet, Salvatore Ferragamo had liabilities of €392.5m due within 12 months, and liabilities of €543.4m due beyond 12 months. Offsetting this, it had €206.7m in cash and €122.5m in receivables that were due within 12 months. So it has liabilities totalling €606.6m more than its cash and near-term receivables, combined.

Salvatore Ferragamo has a market capitalization of €1.35b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. While it does have liabilities worth noting, Salvatore Ferragamo also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Salvatore Ferragamo can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

See our latest analysis for Salvatore Ferragamo

In the last year Salvatore Ferragamo had a loss before interest and tax, and actually shrunk its revenue by 8.7%, to €986m. That's not what we would hope to see.

So How Risky Is Salvatore Ferragamo?

Although Salvatore Ferragamo had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of €55m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. Until we see some positive EBIT, we're a bit cautious of the stock, not least because of the rather modest revenue growth. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 1 warning sign for Salvatore Ferragamo that you should be aware of before investing here.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.