Does Clean Energy Fuels (NASDAQ:CLNE) Have A Healthy Balance Sheet?

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 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 can see that Clean Energy Fuels Corp. (NASDAQ:CLNE) does use debt in its business. But should shareholders be worried about its use of debt?

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. 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, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for Clean Energy Fuels

What Is Clean Energy Fuels's Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2023 Clean Energy Fuels had US$144.9m of debt, an increase on US$35.6m, over one year. But it also has US$219.9m in cash to offset that, meaning it has US$75.0m net cash.

A Look At Clean Energy Fuels' Liabilities

The latest balance sheet data shows that Clean Energy Fuels had liabilities of US$151.8m due within a year, and liabilities of US$214.1m falling due after that. Offsetting these obligations, it had cash of US$219.9m as well as receivables valued at US$128.0m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$18.0m.

Having regard to Clean Energy Fuels' size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the US$1.00b company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, Clean Energy Fuels boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Clean Energy Fuels'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.

Over 12 months, Clean Energy Fuels reported revenue of US$469m, which is a gain of 79%, 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.

So How Risky Is Clean Energy Fuels?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And in the last year Clean Energy Fuels had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of US$27m and booked a US$73m accounting loss. Given it only has net cash of US$75.0m, the company may need to raise more capital if it doesn't reach break-even soon. Clean Energy Fuels's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. Pre-profit companies are often risky, but they can also offer great rewards. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Clean Energy Fuels you should know about.

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.