Is Sportradar Group (NASDAQ:SRAD) Taking On Too Much Debt?

David Iben put it best when he said, “Volatility is not a risk we care about. We care about avoiding permanent loss of capital.” It’s only natural to consider a company’s balance sheet when you checks how risky it is, as debt is often involved in a company collapse. As with many other companies Sportradar Group AG (NASDAQ:SRAD) uses debt. But the more important question is: How much risk does this debt pose?

When is debt dangerous?

Debt and other liabilities become risky for a company when it cannot easily meet those obligations, either through free cash flow or by raising capital at an attractive price. A key component of capitalism is the process of “creative destruction,” in which failed companies are mercilessly liquidated by their bankers. While this isn’t all that common, we often see indebted companies permanently diluting their shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, especially capital-intensive businesses. When considering how much debt a company has, you first need to consider its cash flow and debt together.

Check out our latest analysis for Sportradar Group

How much is Sportradar Group’s net debt?

As you can see below, Sportradar Group had debts of €47.2 million at the end of September 2024, up from €27.2 million the previous year. Click on the image for more details. However, the balance sheet shows that the company holds €368.4 million in cash, so it actually has €321.2 million in net cash.

How healthy is Sportradar Group’s balance sheet?

The latest balance sheet shows that Sportradar Group had liabilities of €369.2 million within a year and liabilities of €991.8 million beyond that. Against these obligations, the company had cash and cash equivalents of €368.4 million and receivables worth €167.7 million due in 12 months. The liabilities therefore amount to a total of €825.0 million more than the liquid assets and short-term receivables combined.

Of course, Sportradar Group has a market capitalization of €4.90b, so these liabilities are probably manageable. However, we believe it is worth keeping an eye on balance sheet strength, as it can change over time. Despite its significant liabilities, Sportradar Group has net cash, so it’s fair to say it doesn’t have a huge debt load!

It’s worth noting that Sportradar Group’s EBIT shot up like bamboo after rain, growing 42% over the last twelve months. This will make it easier to manage your debts. There is no doubt that the balance sheet is where we learn the most about debt. However, the company’s future profitability will ultimately determine whether Sportradar Group can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay off its debts with paper profits; it takes cash. Even though Sportradar Group has net cash on its balance sheet, it’s still worth taking a look at its ability to convert earnings before interest and taxes (EBIT) to free cash flow to help us understand how quickly it is building that cash ( or eroded). Balance. Over the last three years, Sportradar Group produced stable free cash flow accounting for 68% of its EBIT, which is about what we would expect. That ready cash means it can pay down its debt whenever it wants.

In summary

While Sportradar Group has more liabilities than cash, it also has net cash of €321.2m. And it impressed us with its EBIT growth of 42% last year. So we have no problem with Sportradar Group’s use of debt. We think it’s more important than most other metrics to track how quickly earnings per share are growing, if at all. If you’ve come to this conclusion too, you’re in luck, because today you can check out this interactive graph of Sportradar Group’s earnings per share for free.

Ultimately, it’s often better to focus on companies that are free of net debt. You can access our special list of such companies (all with a track record of growing profits). It’s free.

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