Is Atlanta Braves Holdings (NASDAQ:BATR.K) A Risky Investment?

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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Atlanta Braves Holdings, Inc. (NASDAQ:BATR.K) does carry debt. But should shareholders be worried about its use of debt?

Why Does Debt Bring Risk?

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. 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. 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.

View our latest analysis for Atlanta Braves Holdings

How Much Debt Does Atlanta Braves Holdings Carry?

The image below, which you can click on for greater detail, shows that at December 2023 Atlanta Braves Holdings had debt of US$569.3m, up from US$542.0m in one year. On the flip side, it has US$125.1m in cash leading to net debt of about US$444.1m.

A Look At Atlanta Braves Holdings' Liabilities

The latest balance sheet data shows that Atlanta Braves Holdings had liabilities of US$233.7m due within a year, and liabilities of US$730.0m falling due after that. Offsetting this, it had US$125.1m in cash and US$62.9m in receivables that were due within 12 months. So its liabilities total US$775.6m more than the combination of its cash and short-term receivables.

This deficit isn't so bad because Atlanta Braves Holdings is worth US$2.46b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Atlanta Braves Holdings'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, Atlanta Braves Holdings reported revenue of US$641m, which is a gain of 8.9%, 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, Atlanta Braves Holdings had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at US$44m. 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$67m of cash over the last year. So suffice it to say we do consider the stock to be risky. 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, we've discovered 2 warning signs for Atlanta Braves Holdings that you should be aware of before investing here.

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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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.