Health Check: How Prudently Does enCore Energy (CVE:EU) Use 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.' 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. As with many other companies enCore Energy Corp. (CVE:EU) makes use of debt. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

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. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does enCore Energy Carry?

The image below, which you can click on for greater detail, shows that at September 2025 enCore Energy had debt of US$109.3m, up from US$21.2m in one year. However, its balance sheet shows it holds US$116.2m in cash, so it actually has US$6.91m net cash.

How Strong Is enCore Energy's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that enCore Energy had liabilities of US$9.47m due within 12 months and liabilities of US$154.7m due beyond that. On the other hand, it had cash of US$116.2m and US$1.69m worth of receivables due within a year. So its liabilities total US$46.2m more than the combination of its cash and short-term receivables.

Since publicly traded enCore Energy shares are worth a total of US$448.7m, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, enCore Energy also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine enCore Energy's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Check out our latest analysis for enCore Energy

In the last year enCore Energy had a loss before interest and tax, and actually shrunk its revenue by 13%, to US$44m. We would much prefer see growth.

So How Risky Is enCore Energy?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that enCore Energy had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through US$69m of cash and made a loss of US$52m. But at least it has US$6.91m on the balance sheet to spend on growth, near-term. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. 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, we've discovered 1 warning sign for enCore Energy that you should be aware of before investing here.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.