Is Armlogi Holding (NASDAQ:BTOC) Weighed On By Its Debt Load?

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. We can see that Armlogi Holding Corp. (NASDAQ:BTOC) does use debt in its business. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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.

What Is Armlogi Holding's Net Debt?

The image below, which you can click on for greater detail, shows that at March 2025 Armlogi Holding had debt of US$6.34m, up from US$350.2k in one year. However, it also had US$5.63m in cash, and so its net debt is US$706.2k.

How Strong Is Armlogi Holding's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Armlogi Holding had liabilities of US$42.8m due within 12 months and liabilities of US$105.1m due beyond that. Offsetting this, it had US$5.63m in cash and US$30.7m in receivables that were due within 12 months. So its liabilities total US$111.5m more than the combination of its cash and short-term receivables.

The deficiency here weighs heavily on the US$59.4m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we definitely think shareholders need to watch this one closely. After all, Armlogi Holding would likely require a major re-capitalisation if it had to pay its creditors today. Armlogi Holding may have virtually no net debt, but it does have a lot of liabilities. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Armlogi Holding 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.

View our latest analysis for Armlogi Holding

In the last year Armlogi Holding wasn't profitable at an EBIT level, but managed to grow its revenue by 8.8%, to US$185m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Importantly, Armlogi Holding had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping US$15m. Considering that alongside the liabilities mentioned above make us nervous about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. Not least because it burned through US$11m in negative free cash flow over the last year. So suffice it to say we consider the stock to be risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 3 warning signs for Armlogi Holding you should be aware of, and 1 of them makes us a bit uncomfortable.

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.