We Think Bloom Energy (NYSE:BE) Has A Fair Chunk Of Debt

Warren Buffett famously said, '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. We can see that Bloom Energy Corporation (NYSE:BE) does use debt in its business. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. 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.

Check out our latest analysis for Bloom Energy

What Is Bloom Energy's Net Debt?

As you can see below, at the end of June 2023, Bloom Energy had US$1.32b of debt, up from US$847.5m a year ago. Click the image for more detail. However, it also had US$767.1m in cash, and so its net debt is US$549.9m.

How Strong Is Bloom Energy's Balance Sheet?

According to the last reported balance sheet, Bloom Energy had liabilities of US$518.0m due within 12 months, and liabilities of US$1.55b due beyond 12 months. Offsetting these obligations, it had cash of US$767.1m as well as receivables valued at US$401.5m due within 12 months. So it has liabilities totalling US$894.6m more than its cash and near-term receivables, combined.

Bloom Energy has a market capitalization of US$3.14b, so it could very likely raise cash to ameliorate 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 it is future earnings, more than anything, that will determine Bloom Energy'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.

In the last year Bloom Energy wasn't profitable at an EBIT level, but managed to grow its revenue by 34%, to US$1.3b. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Despite the top line growth, Bloom Energy still had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost US$147m at the EBIT level. 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. However, it doesn't help that it burned through US$573m of cash over the last year. So suffice it to say 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 example, we've discovered 1 warning sign for Bloom Energy that you should be aware of before investing here.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.