We Think NuEnergy Gas (ASX:NGY) Has A Fair Chunk Of Debt

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 can see that NuEnergy Gas Limited (ASX:NGY) does use debt in its business. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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 NuEnergy Gas's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 NuEnergy Gas had AU$5.28m of debt, an increase on AU$4.86m, over one year. However, it does have AU$2.43m in cash offsetting this, leading to net debt of about AU$2.84m.

A Look At NuEnergy Gas' Liabilities

Zooming in on the latest balance sheet data, we can see that NuEnergy Gas had liabilities of AU$16.9m due within 12 months and no liabilities due beyond that. Offsetting this, it had AU$2.43m in cash and AU$211.8k in receivables that were due within 12 months. So its liabilities total AU$14.2m more than the combination of its cash and short-term receivables.

While this might seem like a lot, it is not so bad since NuEnergy Gas has a market capitalization of AU$53.4m, and so it could probably strengthen its balance sheet by raising capital if it needed to. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if NuEnergy Gas 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.

See our latest analysis for NuEnergy Gas

Given its lack of meaningful operating revenue, NuEnergy Gas shareholders no doubt hope it can fund itself until it can sell some combustibles.

Caveat Emptor

Importantly, NuEnergy Gas had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost AU$569k at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through AU$3.0m of cash over the last year. So in short it's a really risky stock. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 4 warning signs for NuEnergy Gas (2 don't sit too well with us!) 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.