Does Greenway Greenhouse Cannabis (CSE:GWAY) Have A Healthy Balance Sheet?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. Importantly, Greenway Greenhouse Cannabis Corporation (CSE:GWAY) does carry debt. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is Greenway Greenhouse Cannabis's Net Debt?

The chart below, which you can click on for greater detail, shows that Greenway Greenhouse Cannabis had CA$7.56m in debt in June 2025; about the same as the year before. However, because it has a cash reserve of CA$2.19m, its net debt is less, at about CA$5.36m.

How Healthy Is Greenway Greenhouse Cannabis' Balance Sheet?

We can see from the most recent balance sheet that Greenway Greenhouse Cannabis had liabilities of CA$11.7m falling due within a year, and liabilities of CA$10.4m due beyond that. Offsetting these obligations, it had cash of CA$2.19m as well as receivables valued at CA$639.5k due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by CA$19.3m.

This is a mountain of leverage relative to its market capitalization of CA$23.8m. 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 you can't view debt in total isolation; since Greenway Greenhouse Cannabis will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for Greenway Greenhouse Cannabis

Over 12 months, Greenway Greenhouse Cannabis reported revenue of CA$8.2m, which is a gain of 27%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

While we can certainly appreciate Greenway Greenhouse Cannabis's revenue growth, its earnings before interest and tax (EBIT) loss is not ideal. Indeed, it lost CA$559k at the EBIT level. 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. We would feel better if it turned its trailing twelve month loss of CA$1.7m into a profit. So to be blunt we do think it is 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 Greenway Greenhouse Cannabis has 2 warning signs (and 1 which is concerning) we think you should know about.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.