Does Orion Energy Systems (NASDAQ:OESX) Have A Healthy Balance Sheet?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 Orion Energy Systems, Inc. (NASDAQ:OESX) does use debt in its business. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Orion Energy Systems's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Orion Energy Systems had US$8.49m of debt in June 2025, down from US$13.5m, one year before. However, it does have US$3.56m in cash offsetting this, leading to net debt of about US$4.92m.

How Healthy Is Orion Energy Systems' Balance Sheet?

The latest balance sheet data shows that Orion Energy Systems had liabilities of US$26.6m due within a year, and liabilities of US$11.7m falling due after that. Offsetting these obligations, it had cash of US$3.56m as well as receivables valued at US$17.0m due within 12 months. So it has liabilities totalling US$17.6m more than its cash and near-term receivables, combined.

This deficit isn't so bad because Orion Energy Systems is worth US$31.8m, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. 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 Orion Energy Systems 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.

View our latest analysis for Orion Energy Systems

In the last year Orion Energy Systems had a loss before interest and tax, and actually shrunk its revenue by 15%, to US$79m. That's not what we would hope to see.

Caveat Emptor

While Orion Energy Systems's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Its EBIT loss was a whopping US$7.5m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any 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$9.3m. In the meantime, we consider the stock very risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 2 warning signs for Orion Energy Systems that you should be aware of.

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.