Does Momentive Global (NASDAQ:MNTV) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. Importantly, Momentive Global Inc. (NASDAQ:MNTV) does carry debt. But is this debt a concern to shareholders?

When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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. 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 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 Momentive Global

How Much Debt Does Momentive Global Carry?

As you can see below, Momentive Global had US$213.1m of debt, at March 2021, which is about the same as the year before. You can click the chart for greater detail. However, it does have US$247.4m in cash offsetting this, leading to net cash of US$34.3m.

How Strong Is Momentive Global's Balance Sheet?

The latest balance sheet data shows that Momentive Global had liabilities of US$248.4m due within a year, and liabilities of US$299.9m falling due after that. Offsetting these obligations, it had cash of US$247.4m as well as receivables valued at US$23.6m due within 12 months. So it has liabilities totalling US$277.2m more than its cash and near-term receivables, combined.

Given Momentive Global has a market capitalization of US$3.01b, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, Momentive Global 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 ultimately the future profitability of the business will decide if Momentive Global can strengthen its balance sheet over time. 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, Momentive Global reported revenue of US$390m, which is a gain of 19%, 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.

So How Risky Is Momentive Global?

While Momentive Global lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$60m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. Until we see some positive EBIT, we're a bit cautious of the stock, not least because of the rather modest revenue growth. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Momentive Global you should know about.

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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