LSB Industries (NYSE:LXU) Is Carrying A Fair Bit Of Debt

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.' 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 can see that LSB Industries, Inc. (NYSE:LXU) does use debt in its business. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

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. 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, 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.

What Is LSB Industries's Net Debt?

You can click the graphic below for the historical numbers, but it shows that LSB Industries had US$456.7m of debt in June 2025, down from US$488.1m, one year before. However, because it has a cash reserve of US$124.9m, its net debt is less, at about US$331.9m.

How Strong Is LSB Industries' Balance Sheet?

The latest balance sheet data shows that LSB Industries had liabilities of US$96.5m due within a year, and liabilities of US$535.8m falling due after that. On the other hand, it had cash of US$124.9m and US$51.3m worth of receivables due within a year. So its liabilities total US$456.1m more than the combination of its cash and short-term receivables.

This is a mountain of leverage relative to its market capitalization of US$626.1m. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if LSB Industries 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.

See our latest analysis for LSB Industries

Over 12 months, LSB Industries reported revenue of US$539m, which is a gain of 2.6%, 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

Over the last twelve months LSB Industries produced an earnings before interest and tax (EBIT) loss. Indeed, it lost US$4.5m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any 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$26m of cash over the last year. So suffice it to say we do consider the stock to be risky. When I consider a company to be a bit risky, I think it is responsible to check out whether insiders have been reporting any share sales. Luckily, you can click here ito see our graphic depicting LSB Industries insider transactions.

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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.