Does RiceBran Technologies (NASDAQ:RIBT) 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 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. Importantly, RiceBran Technologies (NASDAQ:RIBT) does carry debt. But the real question is whether this debt is making the company risky.

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for RiceBran Technologies

What Is RiceBran Technologies's Net Debt?

As you can see below, at the end of March 2022, RiceBran Technologies had US$5.97m of debt, up from US$4.33m a year ago. Click the image for more detail. However, it also had US$5.87m in cash, and so its net debt is US$105.0k.

How Healthy Is RiceBran Technologies' Balance Sheet?

The latest balance sheet data shows that RiceBran Technologies had liabilities of US$10.8m due within a year, and liabilities of US$3.34m falling due after that. Offsetting these obligations, it had cash of US$5.87m as well as receivables valued at US$4.63m due within 12 months. So its liabilities total US$3.62m more than the combination of its cash and short-term receivables.

Since publicly traded RiceBran Technologies shares are worth a total of US$37.0m, 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. Carrying virtually no net debt, RiceBran Technologies 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 RiceBran Technologies'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, RiceBran Technologies reported revenue of US$33m, which is a gain of 25%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Despite the top line growth, RiceBran Technologies still had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping US$6.8m. 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$5.3m 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. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 5 warning signs for RiceBran Technologies (2 shouldn't be ignored!) that you should be aware of before investing here.

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.