Here's Why Hydrapres (WSE:HPS) Can Afford Some Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Hydrapres S.A. (WSE:HPS) does carry debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Hydrapres's Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 Hydrapres had zł10.1m of debt, an increase on zł7.80m, over one year. However, because it has a cash reserve of zł1.98m, its net debt is less, at about zł8.10m.

A Look At Hydrapres' Liabilities

We can see from the most recent balance sheet that Hydrapres had liabilities of zł7.22m falling due within a year, and liabilities of zł10.8m due beyond that. Offsetting these obligations, it had cash of zł1.98m as well as receivables valued at zł6.12m due within 12 months. So it has liabilities totalling zł9.92m more than its cash and near-term receivables, combined.

While this might seem like a lot, it is not so bad since Hydrapres has a market capitalization of zł25.4m, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Hydrapres will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Hydrapres

In the last year Hydrapres had a loss before interest and tax, and actually shrunk its revenue by 5.7%, to zł31m. That's not what we would hope to see.

Caveat Emptor

Over the last twelve months Hydrapres produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable zł4.1m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through zł1.4m of cash over the last year. So in short it's a really risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 4 warning signs we've spotted with Hydrapres (including 3 which can't be ignored) .

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.