Does Bridger Aerospace Group Holdings (NASDAQ:BAER) Have A Healthy Balance Sheet?

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, Bridger Aerospace Group Holdings, Inc. (NASDAQ:BAER) does carry debt. But is this debt a concern to shareholders?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

See our latest analysis for Bridger Aerospace Group Holdings

What Is Bridger Aerospace Group Holdings's Net Debt?

The chart below, which you can click on for greater detail, shows that Bridger Aerospace Group Holdings had US$205.2m in debt in September 2024; about the same as the year before. However, because it has a cash reserve of US$33.9m, its net debt is less, at about US$171.3m.

A Look At Bridger Aerospace Group Holdings' Liabilities

According to the last reported balance sheet, Bridger Aerospace Group Holdings had liabilities of US$21.7m due within 12 months, and liabilities of US$216.2m due beyond 12 months. Offsetting this, it had US$33.9m in cash and US$27.3m in receivables that were due within 12 months. So it has liabilities totalling US$176.8m more than its cash and near-term receivables, combined.

This deficit casts a shadow over the US$113.5m company, like a colossus towering over mere mortals. So we definitely think shareholders need to watch this one closely. At the end of the day, Bridger Aerospace Group Holdings would probably need a major re-capitalization if its creditors were to demand repayment. 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 Bridger Aerospace Group Holdings can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Over 12 months, Bridger Aerospace Group Holdings reported revenue of US$84m, which is a gain of 26%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.

Caveat Emptor

Despite the top line growth, Bridger Aerospace Group Holdings still had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost US$4.8m at the EBIT level. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. It's fair to say the loss of US$59m didn't encourage us either; we'd like to see a profit. In the meantime, we consider the stock to be 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 3 warning signs for Bridger Aerospace Group Holdings that you should be aware of before investing here.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.