Is Lazydays Holdings (NASDAQ:GORV) A Risky Investment?

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. As with many other companies Lazydays Holdings, Inc. (NASDAQ:GORV) makes use of debt. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

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. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Lazydays Holdings's Debt?

You can click the graphic below for the historical numbers, but it shows that Lazydays Holdings had US$480.0m of debt in December 2024, down from US$652.7m, one year before. However, because it has a cash reserve of US$24.7m, its net debt is less, at about US$455.3m.

A Look At Lazydays Holdings' Liabilities

We can see from the most recent balance sheet that Lazydays Holdings had liabilities of US$378.9m falling due within a year, and liabilities of US$223.6m due beyond that. Offsetting these obligations, it had cash of US$24.7m as well as receivables valued at US$28.4m due within 12 months. So it has liabilities totalling US$549.3m more than its cash and near-term receivables, combined.

This deficit casts a shadow over the US$28.5m company, like a colossus towering over mere mortals. So we definitely think shareholders need to watch this one closely. After all, Lazydays Holdings would likely require a major re-capitalisation if it had to pay its creditors today. There's no doubt that we learn most about debt from the balance sheet. But it is Lazydays Holdings's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot .

View our latest analysis for Lazydays Holdings

Over 12 months, Lazydays Holdings made a loss at the EBIT level, and saw its revenue drop to US$872m, which is a fall of 20%. We would much prefer see growth.

Caveat Emptor

Not only did Lazydays Holdings's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Indeed, it lost a very considerable US$60m at the EBIT level. When you combine this with the very significant balance sheet liabilities mentioned above, we are so wary of it that we are basically at a loss for the right words. Sure, the company might have a nice story about how they are going on to a brighter future. But the reality is that it is low on liquid assets relative to liabilities, and it lost US$187m in the last year. So we think buying this stock is 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 instance, we've identified 4 warning signs for Lazydays Holdings (3 are significant) you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.