Replenish Nutrients Holding (CSE:ERTH) Is Carrying A Fair Bit Of Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. As with many other companies Replenish Nutrients Holding Corp. (CSE:ERTH) makes use of debt. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Replenish Nutrients Holding's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Replenish Nutrients Holding had CA$5.25m of debt, an increase on CA$2.75m, over one year. On the flip side, it has CA$440.1k in cash leading to net debt of about CA$4.81m.

A Look At Replenish Nutrients Holding's Liabilities

We can see from the most recent balance sheet that Replenish Nutrients Holding had liabilities of CA$7.90m falling due within a year, and liabilities of CA$2.16m due beyond that. Offsetting these obligations, it had cash of CA$440.1k as well as receivables valued at CA$1.16m due within 12 months. So its liabilities total CA$8.46m more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of CA$13.6m, so it does suggest shareholders should keep an eye on Replenish Nutrients Holding's use of debt. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. When analysing debt levels, the balance sheet is the obvious place to start. But it is Replenish Nutrients Holding's earnings that will influence how the balance sheet holds up in the future. 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 Replenish Nutrients Holding

Over 12 months, Replenish Nutrients Holding made a loss at the EBIT level, and saw its revenue drop to CA$6.6m, which is a fall of 30%. To be frank that doesn't bode well.

Caveat Emptor

While Replenish Nutrients Holding's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Indeed, it lost a very considerable CA$4.5m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much 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 CA$2.7m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 4 warning signs for Replenish Nutrients Holding (2 make us uncomfortable!) that you should be aware of before investing here.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.