Is Biglari Holdings (NYSE:BH.A) A Risky Investment?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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 note that Biglari Holdings Inc. (NYSE:BH.A) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is Biglari Holdings's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Biglari Holdings had debt of US$19.0m, up from US$50.0k in one year. However, it does have US$137.3m in cash offsetting this, leading to net cash of US$118.3m.

How Strong Is Biglari Holdings' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Biglari Holdings had liabilities of US$126.1m due within 12 months and liabilities of US$148.2m due beyond that. Offsetting this, it had US$137.3m in cash and US$21.1m in receivables that were due within 12 months. So its liabilities total US$115.9m more than the combination of its cash and short-term receivables.

Given Biglari Holdings has a market capitalization of US$983.4m, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. While it does have liabilities worth noting, Biglari Holdings also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Biglari Holdings

Shareholders should be aware that Biglari Holdings's EBIT was down 31% last year. If that earnings trend continues then paying off its debt will be about as easy as herding cats on to a roller coaster. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Biglari Holdings will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Biglari Holdings has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last three years, Biglari Holdings actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While Biglari Holdings does have more liabilities than liquid assets, it also has net cash of US$118.3m. The cherry on top was that in converted 205% of that EBIT to free cash flow, bringing in US$63m. So we are not troubled with Biglari Holdings's debt use. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 1 warning sign for Biglari Holdings that you should be aware of.

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.

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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.