Is Tantalus Systems Holding (TSE:GRID) Using Debt In A Risky Way?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. As with many other companies Tantalus Systems Holding Inc. (TSE:GRID) makes use of debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

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. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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 examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Tantalus Systems Holding Carry?

The image below, which you can click on for greater detail, shows that Tantalus Systems Holding had debt of US$10.4m at the end of March 2025, a reduction from US$11.4m over a year. However, its balance sheet shows it holds US$15.9m in cash, so it actually has US$5.51m net cash.

How Strong Is Tantalus Systems Holding's Balance Sheet?

The latest balance sheet data shows that Tantalus Systems Holding had liabilities of US$31.4m due within a year, and liabilities of US$6.20m falling due after that. Offsetting this, it had US$15.9m in cash and US$10.1m in receivables that were due within 12 months. So it has liabilities totalling US$11.5m more than its cash and near-term receivables, combined.

Given Tantalus Systems Holding has a market capitalization of US$103.2m, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. While it does have liabilities worth noting, Tantalus Systems Holding also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Tantalus Systems Holding's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

View our latest analysis for Tantalus Systems Holding

In the last year Tantalus Systems Holding wasn't profitable at an EBIT level, but managed to grow its revenue by 14%, to US$47m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is Tantalus Systems Holding?

While Tantalus Systems Holding lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$5.6m. 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. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that Tantalus Systems Holding is showing 1 warning sign in our investment analysis , you should know about...

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.