Titan Machinery (NASDAQ:TITN) Has Debt But No Earnings; Should You Worry?

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.' 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, Titan Machinery Inc. (NASDAQ:TITN) does carry debt. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Titan Machinery's Debt?

You can click the graphic below for the historical numbers, but it shows that Titan Machinery had US$1.01b of debt in July 2025, down from US$1.17b, one year before. On the flip side, it has US$32.7m in cash leading to net debt of about US$974.4m.

How Strong Is Titan Machinery's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Titan Machinery had liabilities of US$1.01b due within 12 months and liabilities of US$256.5m due beyond that. Offsetting this, it had US$32.7m in cash and US$127.6m in receivables that were due within 12 months. So it has liabilities totalling US$1.11b more than its cash and near-term receivables, combined.

This deficit casts a shadow over the US$376.4m company, like a colossus towering over mere mortals. So we definitely think shareholders need to watch this one closely. After all, Titan Machinery would likely require a major re-capitalisation if it had to pay its creditors today. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Titan Machinery's ability to maintain a healthy balance sheet going forward. 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 Titan Machinery

Over 12 months, Titan Machinery made a loss at the EBIT level, and saw its revenue drop to US$2.6b, which is a fall of 8.1%. That's not what we would hope to see.

Caveat Emptor

Over the last twelve months Titan Machinery produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable US$38m at the EBIT level. If you consider the significant liabilities mentioned above, we are extremely wary of this investment. That said, it is possible that the company will turn its fortunes around. Nevertheless, we would not bet on it given that it lost US$61m in just last twelve months, and it doesn't have much by way of liquid assets. So while it's not wise to assume the company will fail, we do think it's risky. 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. For example - Titan Machinery has 1 warning sign we think 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.