Does RiceBran Technologies (NASDAQ:RIBT) Have A Healthy Balance Sheet?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that RiceBran Technologies (NASDAQ:RIBT) does have debt on its balance sheet. But is this debt a concern to shareholders?

What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

See our latest analysis for RiceBran Technologies

How Much Debt Does RiceBran Technologies Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2021 RiceBran Technologies had US$4.33m of debt, an increase on US$2.71m, over one year. However, it does have US$5.42m in cash offsetting this, leading to net cash of US$1.09m.

How Healthy Is RiceBran Technologies' Balance Sheet?

The latest balance sheet data shows that RiceBran Technologies had liabilities of US$7.35m due within a year, and liabilities of US$3.47m falling due after that. Offsetting this, it had US$5.42m in cash and US$4.33m in receivables that were due within 12 months. So its liabilities total US$1.07m more than the combination of its cash and short-term receivables.

Since publicly traded RiceBran Technologies shares are worth a total of US$48.2m, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, RiceBran Technologies 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 it is future earnings, more than anything, that will determine RiceBran Technologies's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Over 12 months, RiceBran Technologies reported revenue of US$26m, which is a gain of 3.1%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is RiceBran Technologies?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year RiceBran Technologies had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$5.9m of cash and made a loss of US$8.1m. With only US$1.09m on the balance sheet, it would appear that its going to need to raise capital again soon. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. 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. To that end, you should learn about the 4 warning signs we've spotted with RiceBran Technologies (including 1 which makes us a bit uncomfortable) .

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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