Stoneridge (NYSE:SRI) Is Carrying A Fair Bit 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.' 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 can see that Stoneridge, Inc. (NYSE:SRI) does use debt in its business. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

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. If things get really bad, the lenders can take control of the business. 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, 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.

What Is Stoneridge's Net Debt?

The image below, which you can click on for greater detail, shows that Stoneridge had debt of US$164.4m at the end of June 2025, a reduction from US$189.5m over a year. On the flip side, it has US$49.8m in cash leading to net debt of about US$114.6m.

How Healthy Is Stoneridge's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Stoneridge had liabilities of US$184.2m due within 12 months and liabilities of US$194.7m due beyond that. On the other hand, it had cash of US$49.8m and US$163.1m worth of receivables due within a year. So it has liabilities totalling US$166.0m more than its cash and near-term receivables, combined.

This is a mountain of leverage relative to its market capitalization of US$217.1m. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Stoneridge can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Check out our latest analysis for Stoneridge

In the last year Stoneridge had a loss before interest and tax, and actually shrunk its revenue by 7.0%, to US$878m. That's not what we would hope to see.

Caveat Emptor

Importantly, Stoneridge had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at US$4.7m. 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. For example, we would not want to see a repeat of last year's loss of US$30m. In the meantime, we consider the stock very risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 2 warning signs for Stoneridge (1 is concerning) you should be aware of.

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.