Is Beachbody Company (NYSE:BODI) Weighed On By Its Debt Load?

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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that The Beachbody Company, Inc. (NYSE:BODI) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

What Risk Does Debt Bring?

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. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

View our latest analysis for Beachbody Company

How Much Debt Does Beachbody Company Carry?

The image below, which you can click on for greater detail, shows that Beachbody Company had debt of US$26.3m at the end of March 2024, a reduction from US$41.5m over a year. However, its balance sheet shows it holds US$40.9m in cash, so it actually has US$14.7m net cash.

How Strong Is Beachbody Company's Balance Sheet?

The latest balance sheet data shows that Beachbody Company had liabilities of US$162.7m due within a year, and liabilities of US$27.6m falling due after that. Offsetting this, it had US$40.9m in cash and US$1.61m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$147.7m.

This deficit casts a shadow over the US$51.5m company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. At the end of the day, Beachbody Company would probably need a major re-capitalization if its creditors were to demand repayment. Beachbody Company boasts net cash, so it's fair to say it does not have a heavy debt load, even if it does have very significant liabilities, in total. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Beachbody Company 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, Beachbody Company made a loss at the EBIT level, and saw its revenue drop to US$502m, which is a fall of 21%. To be frank that doesn't bode well.

So How Risky Is Beachbody Company?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Beachbody Company lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$10m and booked a US$138m accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of US$14.7m. That kitty means the company can keep spending for growth for at least two years, at current rates. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. 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 - Beachbody Company has 4 warning signs we think you should be aware of.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.

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