Here's Why Barfresh Food Group (NASDAQ:BRFH) Can Afford Some Debt

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. We note that Barfresh Food Group, Inc. (NASDAQ:BRFH) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Barfresh Food Group Carry?

As you can see below, at the end of September 2025, Barfresh Food Group had US$2.33m of debt, up from US$332.0k a year ago. Click the image for more detail. However, because it has a cash reserve of US$1.89m, its net debt is less, at about US$441.0k.

How Healthy Is Barfresh Food Group's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Barfresh Food Group had liabilities of US$4.54m due within 12 months and liabilities of US$330.0k due beyond that. On the other hand, it had cash of US$1.89m and US$2.55m worth of receivables due within a year. So its liabilities total US$432.0k more than the combination of its cash and short-term receivables.

Having regard to Barfresh Food Group's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the US$48.7m company is short on cash, but still worth keeping an eye on the balance sheet. Carrying virtually no net debt, Barfresh Food Group has a very light debt load indeed. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Barfresh Food Group'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.

See our latest analysis for Barfresh Food Group

Over 12 months, Barfresh Food Group reported revenue of US$12m, which is a gain of 17%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Importantly, Barfresh Food Group had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost US$2.7m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through US$2.9m of cash over the last year. So suffice it to say we consider the stock very risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 4 warning signs for Barfresh Food Group (1 is concerning!) that you should be aware of before investing here.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.