Health Check: How Prudently Does LiqTech International (NASDAQ:LIQT) Use Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies LiqTech International, Inc. (NASDAQ:LIQT) makes use of debt. But is this debt a concern to shareholders?

We've discovered 4 warning signs about LiqTech International. View them for free.

Why Does Debt Bring Risk?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is LiqTech International's Debt?

As you can see below, at the end of March 2025, LiqTech International had US$6.37m of debt, up from US$4.83m a year ago. Click the image for more detail. However, it does have US$10.4m in cash offsetting this, leading to net cash of US$4.08m.

A Look At LiqTech International's Liabilities

The latest balance sheet data shows that LiqTech International had liabilities of US$5.51m due within a year, and liabilities of US$12.0m falling due after that. On the other hand, it had cash of US$10.4m and US$4.29m worth of receivables due within a year. So it has liabilities totalling US$2.77m more than its cash and near-term receivables, combined.

Given LiqTech International has a market capitalization of US$16.6m, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, LiqTech International also has more cash than debt, so we're pretty confident it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if LiqTech International 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.

See our latest analysis for LiqTech International

Over 12 months, LiqTech International made a loss at the EBIT level, and saw its revenue drop to US$15m, which is a fall of 18%. That's not what we would hope to see.

So How Risky Is LiqTech International?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that LiqTech International had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of US$8.0m and booked a US$10m accounting loss. However, it has net cash of US$4.08m, so it has a bit of time before it will need more capital. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 4 warning signs we've spotted with LiqTech International (including 2 which shouldn't be ignored) .

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.