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. Importantly, SSR Mining Inc. (TSE:SSRM) does carry debt. But the real question is whether this debt is making the company risky.
When Is Debt A Problem?
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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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.
Check out our latest analysis for SSR Mining
What Is SSR Mining's Debt?
You can click the graphic below for the historical numbers, but it shows that SSR Mining had US$228.0m of debt in June 2024, down from US$262.5m, one year before. However, it does have US$384.4m in cash offsetting this, leading to net cash of US$156.3m.
A Look At SSR Mining's Liabilities
According to the last reported balance sheet, SSR Mining had liabilities of US$288.6m due within 12 months, and liabilities of US$945.9m due beyond 12 months. Offsetting this, it had US$384.4m in cash and US$110.8m in receivables that were due within 12 months. So it has liabilities totalling US$739.2m more than its cash and near-term receivables, combined.
This deficit isn't so bad because SSR Mining is worth US$1.24b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. While it does have liabilities worth noting, SSR Mining also has more cash than debt, so we're pretty confident it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if SSR Mining can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.
In the last year SSR Mining wasn't profitable at an EBIT level, but managed to grow its revenue by 13%, to US$1.2b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.
So How Risky Is SSR Mining?
While SSR Mining lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$106m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. With revenue growth uninspiring, we'd really need to see some positive EBIT before mustering much enthusiasm for this business. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how SSR Mining's profit, revenue, and operating cashflow have changed over the last few years.
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.
About TSX:SSRM
SSR Mining
Engages in the operation, acquisition, exploration, and development of precious metal resource properties in the United States, Türkiye, Canada, and Argentina.
Undervalued with excellent balance sheet.