Does Getty Copper (CVE:GTC) Have A Healthy Balance Sheet?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that Getty Copper Inc. (CVE:GTC) does have debt on its balance sheet. But is this debt a concern to shareholders?

What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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. When we think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for Getty Copper

How Much Debt Does Getty Copper Carry?

As you can see below, at the end of September 2024, Getty Copper had CA$2.94m of debt, up from CA$2.75m a year ago. Click the image for more detail. However, because it has a cash reserve of CA$482.1k, its net debt is less, at about CA$2.46m.

How Healthy Is Getty Copper's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Getty Copper had liabilities of CA$2.32m due within 12 months and liabilities of CA$1.42m due beyond that. Offsetting these obligations, it had cash of CA$482.1k as well as receivables valued at CA$5.0k due within 12 months. So its liabilities total CA$3.26m more than the combination of its cash and short-term receivables.

This is a mountain of leverage relative to its market capitalization of CA$4.18m. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Getty Copper'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.

Given its lack of meaningful operating revenue, investors are probably hoping that Getty Copper finds some valuable resources, before it runs out of money.

Caveat Emptor

Over the last twelve months Getty Copper produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at CA$223k. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through CA$484k of cash over the last year. So in short it's a really risky stock. 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. To that end, you should learn about the 5 warning signs we've spotted with Getty Copper (including 4 which can't be ignored) .

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.