Stock Analysis

Does Bellevue Gold (ASX:BGL) Have A Healthy Balance Sheet?

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ASX:BGL
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Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. Importantly, Bellevue Gold Limited (ASX:BGL) does carry debt. But the more important question is: how much risk is that debt creating?

What Risk Does Debt Bring?

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. If things get really bad, the lenders can take control of the business. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for Bellevue Gold

What Is Bellevue Gold's Net Debt?

As you can see below, at the end of June 2023, Bellevue Gold had AU$126.3m of debt, up from none a year ago. Click the image for more detail. However, because it has a cash reserve of AU$64.7m, its net debt is less, at about AU$61.6m.

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ASX:BGL Debt to Equity History December 9th 2023

A Look At Bellevue Gold's Liabilities

The latest balance sheet data shows that Bellevue Gold had liabilities of AU$47.3m due within a year, and liabilities of AU$154.8m falling due after that. Offsetting these obligations, it had cash of AU$64.7m as well as receivables valued at AU$4.01m due within 12 months. So its liabilities total AU$133.4m more than the combination of its cash and short-term receivables.

Since publicly traded Bellevue Gold shares are worth a total of AU$2.09b, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. 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 Bellevue Gold 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.

Since Bellevue Gold has no significant operating revenue, shareholders probably hope it will develop a valuable new mine before too long.

Caveat Emptor

Over the last twelve months Bellevue Gold produced an earnings before interest and tax (EBIT) loss. Indeed, it lost AU$27m 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. Another cause for caution is that is bled AU$262m in negative free cash flow over the last twelve months. So in short it's a really risky stock. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. To that end, you should learn about the 3 warning signs we've spotted with Bellevue Gold (including 1 which shouldn't be ignored) .

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

Valuation is complex, but we're helping make it simple.

Find out whether Bellevue Gold is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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