Is Fiddlehead Resources (CVE:FHR) Using Too Much Debt?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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, Fiddlehead Resources Corp. (CVE:FHR) does carry debt. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

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 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 think about a company's use of debt, we first look at cash and debt together.

What Is Fiddlehead Resources's Net Debt?

The image below, which you can click on for greater detail, shows that at September 2025 Fiddlehead Resources had debt of CA$13.4m, up from CA$11.9m in one year. Net debt is about the same, since the it doesn't have much cash.

A Look At Fiddlehead Resources' Liabilities

The latest balance sheet data shows that Fiddlehead Resources had liabilities of CA$15.5m due within a year, and liabilities of CA$11.6m falling due after that. Offsetting these obligations, it had cash of CA$116.9k as well as receivables valued at CA$1.01m due within 12 months. So it has liabilities totalling CA$26.0m more than its cash and near-term receivables, combined.

This deficit casts a shadow over the CA$5.32m company, like a colossus towering over mere mortals. So we definitely think shareholders need to watch this one closely. At the end of the day, Fiddlehead Resources would probably need a major re-capitalization if its creditors were to demand repayment. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Fiddlehead Resources will need earnings to service that debt. 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.

Check out our latest analysis for Fiddlehead Resources

Over 12 months, Fiddlehead Resources reported revenue of CA$14m, which is a gain of 1,913%, although it did not report any earnings before interest and tax. That's virtually the hole-in-one of revenue growth!

Caveat Emptor

Despite the top line growth, Fiddlehead Resources still had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping CA$3.9m. If you consider the significant liabilities mentioned above, we are extremely wary of this investment. That said, it is possible that the company will turn its fortunes around. Nevertheless, we would not bet on it given that it vaporized CA$2.0m in cash over the last twelve months, and it doesn't have much by way of liquid assets. So we think this stock is risky, like walking through a dirty dog park with a mask on. 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 example Fiddlehead Resources has 4 warning signs (and 3 which are concerning) we think you should know about.

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.

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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.