Does CH Offshore (SGX:C13) 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 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, CH Offshore Ltd. (SGX:C13) does carry debt. But the real question is whether this debt is making the company risky.

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for CH Offshore

What Is CH Offshore's Net Debt?

You can click the graphic below for the historical numbers, but it shows that CH Offshore had US$8.01m of debt in June 2022, down from US$9.98m, one year before. But it also has US$8.25m in cash to offset that, meaning it has US$232.0k net cash.

A Look At CH Offshore's Liabilities

The latest balance sheet data shows that CH Offshore had liabilities of US$10.7m due within a year, and liabilities of US$4.76m falling due after that. Offsetting this, it had US$8.25m in cash and US$11.0m in receivables that were due within 12 months. So it actually has US$3.75m more liquid assets than total liabilities.

This short term liquidity is a sign that CH Offshore could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, CH Offshore boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since CH Offshore will need earnings to service that debt. 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.

Over 12 months, CH Offshore reported revenue of US$18m, which is a gain of 29%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is CH Offshore?

Although CH Offshore had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of US$2.1m. 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. We think its revenue growth of 29% is a good sign. There's no doubt fast top line growth can cure all manner of ills, for a stock. 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. Case in point: We've spotted 2 warning signs for CH Offshore you should be aware of, and 1 of them doesn't sit too well with us.

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.