Is Proficient Auto Logistics (NASDAQ:PAL) 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. We can see that Proficient Auto Logistics, Inc. (NASDAQ:PAL) does use debt in its business. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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. When we think about a company's use of debt, we first look at cash and debt together.

What Is Proficient Auto Logistics's Debt?

As you can see below, at the end of June 2025, Proficient Auto Logistics had US$90.2m of debt, up from US$73.5m a year ago. Click the image for more detail. On the flip side, it has US$13.6m in cash leading to net debt of about US$76.6m.

How Healthy Is Proficient Auto Logistics' Balance Sheet?

We can see from the most recent balance sheet that Proficient Auto Logistics had liabilities of US$62.2m falling due within a year, and liabilities of US$118.8m due beyond that. On the other hand, it had cash of US$13.6m and US$48.2m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$119.1m.

Proficient Auto Logistics has a market capitalization of US$207.9m, 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. 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 Proficient Auto Logistics'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.

See our latest analysis for Proficient Auto Logistics

Over 12 months, Proficient Auto Logistics reported revenue of US$396m, which is a gain of 304%, although it did not report any earnings before interest and tax. That's virtually the hole-in-one of revenue growth!

Caveat Emptor

While we can certainly appreciate Proficient Auto Logistics's revenue growth, its earnings before interest and tax (EBIT) loss is not ideal. To be specific the EBIT loss came in at US$7.6m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. We would feel better if it turned its trailing twelve month loss of US$9.4m into a profit. So in short it's a really risky stock. For riskier companies like Proficient Auto Logistics I always like to keep an eye on whether insiders are buying or selling. So click here if you want to find out for yourself.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.