Is Verde AgriTech (TSE:NPK) Weighed On By Its Debt Load?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. We can see that Verde AgriTech Limited (TSE:NPK) does use debt in its business. But the more important question is: how much risk is that debt creating?

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Verde AgriTech's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Verde AgriTech had CA$45.5m of debt, an increase on CA$41.0m, over one year. On the flip side, it has CA$2.38m in cash leading to net debt of about CA$43.1m.

A Look At Verde AgriTech's Liabilities

According to the last reported balance sheet, Verde AgriTech had liabilities of CA$3.47m due within 12 months, and liabilities of CA$45.4m due beyond 12 months. On the other hand, it had cash of CA$2.38m and CA$8.18m worth of receivables due within a year. So it has liabilities totalling CA$38.3m more than its cash and near-term receivables, combined.

Given this deficit is actually higher than the company's market capitalization of CA$25.8m, we think shareholders really should watch Verde AgriTech's debt levels, like a parent watching their child ride a bike for the first time. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Verde AgriTech 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.

See our latest analysis for Verde AgriTech

In the last year Verde AgriTech had a loss before interest and tax, and actually shrunk its revenue by 37%, to CA$18m. To be frank that doesn't bode well.

Caveat Emptor

While Verde AgriTech's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Its EBIT loss was a whopping CA$6.9m. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it burned through CA$114k in negative free cash flow over the last year. That means it's on the risky side of things. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 4 warning signs for Verde AgriTech (of which 3 are potentially serious!) you should know about.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.