Is Abits Group (NASDAQ:ABTS) A Risky Investment?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. As with many other companies Abits Group Inc. (NASDAQ:ABTS) makes use of debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. If things get really bad, the lenders can take control of the business. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Abits Group Carry?

As you can see below, at the end of September 2025, Abits Group had US$2.25m of debt, up from none a year ago. Click the image for more detail. However, because it has a cash reserve of US$94.1k, its net debt is less, at about US$2.16m.

How Healthy Is Abits Group's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Abits Group had liabilities of US$3.31m due within 12 months and no liabilities due beyond that. Offsetting these obligations, it had cash of US$94.1k as well as receivables valued at US$494.4k due within 12 months. So it has liabilities totalling US$2.72m more than its cash and near-term receivables, combined.

Abits Group has a market capitalization of US$13.5m, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is Abits Group'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.

See our latest analysis for Abits Group

In the last year Abits Group wasn't profitable at an EBIT level, but managed to grow its revenue by 17%, to US$7.1m. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Importantly, Abits Group had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at US$1.3m. 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$3.8m of cash over the last year. So in short it's a really risky stock. 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. For example, we've discovered 4 warning signs for Abits Group (3 don't sit too well with us!) that you should be aware of before investing here.

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.