We think the Greek football predictions organization (ATH:OPAP) can manage their debt with ease

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Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett said “volatility is far from synonymous with risk.” It’s natural to consider a company’s balance sheet when looking at its riskiness, as debt is often involved when a company fails. We notice that Greek SA Football Predictions Organization (ATH:OPAP) has a debt on its balance sheet. But the real question is whether this debt makes the business risky.

What risk does debt carry?

Debt is a tool to help businesses grow, but if a business is unable to repay its lenders, it exists at their mercy. Ultimately, if the company cannot meet its legal debt repayment obligations, shareholders could walk away with nothing. Although not too common, we often see companies in debt permanently diluting their shareholders because lenders force them to raise capital at a ridiculous price. Of course, many companies use debt to finance their growth, without any negative consequences. The first step when considering a company’s debt levels is to consider its cash and debt together.

See our latest analysis for the Greek Football Predictions Organization

How much debt does the Greek Football Prediction Organization owe?

You can click on the graph below for historical figures, but it shows the Greek Football Predictions Organization had €1.04 billion in debt in September 2021, up from €1.10 billion a year previously. However, because it has a cash reserve of €666.5 million, its net debt is lower, at around €378.4 million.

ATSE: OPAP Debt to Equity History February 8, 2022

How strong is the Greek Football Prediction Organization’s track record?

The latest balance sheet data shows that the Greek Football Predictions Organization had liabilities of €532.1 million due within a year, and liabilities of €1.20 billion falling due by the following. In return for these bonds, it had cash of €666.5 million as well as receivables worth €97.0 million maturing in less than 12 months. Its liabilities therefore total €973.2 million more than the combination of its cash and short-term receivables.

The Greek Football Predictions Organization has a market capitalization of €4.55 billion, so it could most likely raise funds to improve its balance sheet, should the need arise. But we definitely want to keep our eyes peeled for indications that its debt is too risky.

In order to assess a company’s debt relative to its earnings, we calculate its net debt divided by its earnings before interest, taxes, depreciation and amortization (EBITDA) and its earnings before interest and taxes (EBIT) divided by its expenses. interest (its interest coverage). In this way, we consider both the absolute amount of debt, as well as the interest rates paid on it.

Looking at its net debt to EBITDA of 0.90 and its interest coverage of 6.2 times, it seems to us that the Greek Football Predictions Organization is probably using debt quite sensibly. But the interest payments are certainly enough to make us think about the affordability of its debt. On top of that, we are pleased to report that the Greek Football Prediction Organization has increased its EBIT by 62%, reducing the specter of future debt repayments. The balance sheet is clearly the area to focus on when analyzing debt. But ultimately, the future profitability of the business will decide whether the Greek Football Prediction Organization can strengthen its balance sheet over time. So if you are focused on the future, you can check out this free report showing analyst earnings forecast.

Finally, a company can only repay its debts with cold hard cash, not with book profits. We must therefore clearly examine whether this EBIT generates a corresponding free cash flow. Over the past three years, the Greek Football Prediction Organization has generated free cash flow amounting to a very strong 94% of its EBIT, more than we expected. This puts him in a very strong position to repay his debt.

Our point of view

The good news is that the Greek Football Predictions Organization’s demonstrated ability to convert EBIT into free cash flow delights us like a fluffy puppy does a toddler. And this is only the beginning of good news since its EBIT growth rate is also very encouraging. Zooming out, the Greek Football Prediction Organization appears to be using debt quite sensibly; and that gets the green light from us. Although debt carries risks, when used wisely, it can also generate a higher return on equity. There is no doubt that we learn the most about debt from the balance sheet. However, not all investment risks reside on the balance sheet, far from it. For example – the Greek Football Prediction Organization has 4 warning signs we think you should know.

Of course, if you’re the type of investor who prefers to buy stocks without the burden of debt, then feel free to check out our exclusive list of cash-efficient growth stocks today.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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