Is FGI Industries (NASDAQ:FGI) A Risky Investment?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. Importantly, FGI Industries Ltd. (NASDAQ:FGI) does carry debt. But should shareholders be worried about its use of debt?

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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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is FGI Industries's Net Debt?

As you can see below, at the end of September 2025, FGI Industries had US$14.1m of debt, up from US$12.5m a year ago. Click the image for more detail. However, because it has a cash reserve of US$1.88m, its net debt is less, at about US$12.2m.

How Healthy Is FGI Industries' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that FGI Industries had liabilities of US$44.2m due within 12 months and liabilities of US$10.4m due beyond that. Offsetting these obligations, it had cash of US$1.88m as well as receivables valued at US$18.1m due within 12 months. So it has liabilities totalling US$34.6m more than its cash and near-term receivables, combined.

This deficit casts a shadow over the US$14.0m company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. At the end of the day, FGI Industries would probably need a major re-capitalization if its creditors were to demand repayment. 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 FGI Industries can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Check out our latest analysis for FGI Industries

In the last year FGI Industries wasn't profitable at an EBIT level, but managed to grow its revenue by 6.7%, to US$136m. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Importantly, FGI Industries had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping US$3.0m. When we look at that alongside the significant liabilities, we're not particularly confident about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. Not least because it burned through US$2.8m in negative free cash flow over the last year. That means it's on the risky side of things. 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. For instance, we've identified 3 warning signs for FGI Industries (2 are potentially serious) you should be aware of.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.