Health Check: How Prudently Does Clean Energy Fuels (NASDAQ:CLNE) Use Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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, Clean Energy Fuels Corp. (NASDAQ:CLNE) does carry debt. But is this debt a concern to shareholders?

What Risk Does Debt Bring?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

See our latest analysis for Clean Energy Fuels

How Much Debt Does Clean Energy Fuels Carry?

As you can see below, at the end of December 2022, Clean Energy Fuels had US$145.6m of debt, up from US$36.1m a year ago. Click the image for more detail. But on the other hand it also has US$263.5m in cash, leading to a US$118.0m net cash position.

A Look At Clean Energy Fuels' Liabilities

The latest balance sheet data shows that Clean Energy Fuels had liabilities of US$148.1m due within a year, and liabilities of US$206.7m falling due after that. Offsetting this, it had US$263.5m in cash and US$114.5m in receivables that were due within 12 months. So it actually has US$23.2m more liquid assets than total liabilities.

This surplus suggests that Clean Energy Fuels has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Clean Energy Fuels boasts net cash, so it's fair to say it does not have a heavy debt load! 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 Clean Energy Fuels 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.

In the last year Clean Energy Fuels wasn't profitable at an EBIT level, but managed to grow its revenue by 64%, to US$420m. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is Clean Energy Fuels?

Although Clean Energy Fuels had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of US$13m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. Keeping in mind its 64% revenue growth over the last year, we think there's a decent chance the company is on track. We'd see further strong growth as an optimistic indication. 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. For example - Clean Energy Fuels has 1 warning sign we think you should be aware of.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.