Is Bitdeer Technologies Group (NASDAQ:BTDR) Using Debt Sensibly?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies Bitdeer Technologies Group (NASDAQ:BTDR) makes use of debt. But the more important question is: how much risk is that debt creating?

When Is Debt A Problem?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

View our latest analysis for Bitdeer Technologies Group

How Much Debt Does Bitdeer Technologies Group Carry?

You can click the graphic below for the historical numbers, but it shows that Bitdeer Technologies Group had US$22.6m of debt in September 2023, down from US$29.8m, one year before. But on the other hand it also has US$171.0m in cash, leading to a US$148.4m net cash position.

How Strong Is Bitdeer Technologies Group's Balance Sheet?

We can see from the most recent balance sheet that Bitdeer Technologies Group had liabilities of US$25.9m falling due within a year, and liabilities of US$276.9m due beyond that. Offsetting these obligations, it had cash of US$171.0m as well as receivables valued at US$13.7m due within 12 months. So its liabilities total US$118.1m more than the combination of its cash and short-term receivables.

Of course, Bitdeer Technologies Group has a market capitalization of US$890.0m, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. While it does have liabilities worth noting, Bitdeer Technologies Group also has more cash than debt, so we're pretty confident it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Bitdeer Technologies Group's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year Bitdeer Technologies Group had a loss before interest and tax, and actually shrunk its revenue by 3.7%, to US$331m. We would much prefer see growth.

So How Risky Is Bitdeer Technologies Group?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And in the last year Bitdeer Technologies Group had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$374m of cash and made a loss of US$65m. With only US$148.4m on the balance sheet, it would appear that its going to need to raise capital again soon. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Be aware that Bitdeer Technologies Group is showing 3 warning signs in our investment analysis , and 2 of those don't sit too well with us...

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.