Is Celsius Resources (ASX:CLA) A Risky Investment?

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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, Celsius Resources Limited (ASX:CLA) does carry debt. But should shareholders be worried about its use of debt?

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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. 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, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Celsius Resources's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Celsius Resources had AU$3.07m of debt, an increase on none, over one year. But on the other hand it also has AU$4.37m in cash, leading to a AU$1.30m net cash position.

A Look At Celsius Resources' Liabilities

Zooming in on the latest balance sheet data, we can see that Celsius Resources had liabilities of AU$2.48m due within 12 months and liabilities of AU$3.17m due beyond that. On the other hand, it had cash of AU$4.37m and AU$38.8k worth of receivables due within a year. So its liabilities total AU$1.24m more than the combination of its cash and short-term receivables.

Since publicly traded Celsius Resources shares are worth a total of AU$40.8m, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, Celsius Resources boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Celsius Resources will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Celsius Resources

Given its lack of meaningful operating revenue, investors are probably hoping that Celsius Resources finds some valuable resources, before it runs out of money.

So How Risky Is Celsius Resources?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year Celsius Resources had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of AU$5.6m and booked a AU$3.0m accounting loss. With only AU$1.30m on the balance sheet, it would appear that its going to need to raise capital again soon. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 6 warning signs for Celsius Resources (3 are a bit concerning) 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.

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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.