Is United Homes Group (NASDAQ:UHG) Using Debt In A Risky Way?

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. Importantly, United Homes Group, Inc. (NASDAQ:UHG) does carry debt. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is United Homes Group's Net Debt?

The chart below, which you can click on for greater detail, shows that United Homes Group had US$147.1m in debt in September 2025; about the same as the year before. However, because it has a cash reserve of US$25.6m, its net debt is less, at about US$121.4m.

How Healthy Is United Homes Group's Balance Sheet?

We can see from the most recent balance sheet that United Homes Group had liabilities of US$90.2m falling due within a year, and liabilities of US$150.0m due beyond that. Offsetting this, it had US$25.6m in cash and US$11.7m in receivables that were due within 12 months. So its liabilities total US$202.8m more than the combination of its cash and short-term receivables.

The deficiency here weighs heavily on the US$70.0m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we definitely think shareholders need to watch this one closely. At the end of the day, United Homes Group 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 it is United Homes Group's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

View our latest analysis for United Homes Group

In the last year United Homes Group had a loss before interest and tax, and actually shrunk its revenue by 6.2%, to US$418m. We would much prefer see growth.

Caveat Emptor

Importantly, United Homes Group had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost US$571k at the EBIT level. If you consider the significant liabilities mentioned above, we are extremely wary of this investment. Of course, it may be able to improve its situation with a bit of luck and good execution. Nevertheless, we would not bet on it given that it lost US$19m in just last twelve months, and it doesn't have much by way of liquid assets. So we think this stock is quite risky. We'd prefer to pass. 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. Be aware that United Homes Group is showing 5 warning signs in our investment analysis , and 3 of those are concerning...

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.