Warren Buffett famously said, ‘Volatility is far from synonymous with risk.’ 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. We note that Elinoil Hellenic Petroleum Company S.A. (ATH:ELIN) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?
When Is Debt A Problem?
Generally speaking, debt only becomes a real problem when a company can’t easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of ‘creative destruction’ where failed businesses are mercilessly liquidated by their bankers. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
How Much Debt Does Elinoil Hellenic Petroleum Carry?
As you can see below, Elinoil Hellenic Petroleum had €91.9m of debt at March 2025, down from €128.9m a year prior. On the flip side, it has €26.4m in cash leading to net debt of about €65.5m.
ATSE:ELIN Debt to Equity History August 26th 2025 How Strong Is Elinoil Hellenic Petroleum’s Balance Sheet?
The latest balance sheet data shows that Elinoil Hellenic Petroleum had liabilities of €130.9m due within a year, and liabilities of €42.9m falling due after that. Offsetting these obligations, it had cash of €26.4m as well as receivables valued at €153.8m due within 12 months. So it can boast €6.51m more liquid assets than total liabilities.
This short term liquidity is a sign that Elinoil Hellenic Petroleum could probably pay off its debt with ease, as its balance sheet is far from stretched.
View our latest analysis for Elinoil Hellenic Petroleum
We measure a company’s debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.
Elinoil Hellenic Petroleum’s debt is 2.7 times its EBITDA, and its EBIT cover its interest expense 3.1 times over. This suggests that while the debt levels are significant, we’d stop short of calling them problematic. The good news is that Elinoil Hellenic Petroleum improved its EBIT by 7.1% over the last twelve months, thus gradually reducing its debt levels relative to its earnings. There’s no doubt that we learn most about debt from the balance sheet. But it is Elinoil Hellenic Petroleum’s earnings that will influence how the balance sheet holds up in the future. So if you’re keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.
Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. So we clearly need to look at whether that EBIT is leading to corresponding free cash flow. Over the most recent three years, Elinoil Hellenic Petroleum recorded free cash flow worth 70% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.
Our View
Elinoil Hellenic Petroleum’s conversion of EBIT to free cash flow suggests it can handle its debt as easily as Cristiano Ronaldo could score a goal against an under 14’s goalkeeper. But we must concede we find its interest cover has the opposite effect. Taking all this data into account, it seems to us that Elinoil Hellenic Petroleum takes a pretty sensible approach to debt. While that brings some risk, it can also enhance returns for shareholders. 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 – Elinoil Hellenic Petroleum has 3 warning signs we think you should be aware of.
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.
Discover if Elinoil Hellenic Petroleum might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.