Greenway Greenhouse Cannabis (CSE:GWAY) Is Making Moderate Use Of Debt

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.' 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 note that Greenway Greenhouse Cannabis Corporation (CSE:GWAY) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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.

How Much Debt Does Greenway Greenhouse Cannabis Carry?

As you can see below, Greenway Greenhouse Cannabis had CA$7.52m of debt, at March 2025, which is about the same as the year before. You can click the chart for greater detail. However, it does have CA$3.14m in cash offsetting this, leading to net debt of about CA$4.37m.

How Strong Is Greenway Greenhouse Cannabis' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Greenway Greenhouse Cannabis had liabilities of CA$11.7m due within 12 months and liabilities of CA$10.5m due beyond that. On the other hand, it had cash of CA$3.14m and CA$666.6k worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by CA$18.4m.

While this might seem like a lot, it is not so bad since Greenway Greenhouse Cannabis has a market capitalization of CA$34.4m, and so it could probably strengthen its balance sheet by raising capital if it needed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. When analysing debt levels, the balance sheet is the obvious place to start. But it is Greenway Greenhouse Cannabis'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 Greenway Greenhouse Cannabis

In the last year Greenway Greenhouse Cannabis wasn't profitable at an EBIT level, but managed to grow its revenue by 71%, to CA$8.9m. Shareholders probably have their fingers crossed that it can grow its way to profits.

Caveat Emptor

Even though Greenway Greenhouse Cannabis managed to grow its top line quite deftly, the cold hard truth is that it is losing money on the EBIT line. To be specific the EBIT loss came in at CA$959k. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much 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$2.1m into a profit. So we do think this stock is quite risky. There's no doubt that we learn most about debt from the balance sheet. 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 doesn't sit too well with us) 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.