Health Check: How Cautiously Does FuelCell Energy (NASDAQ: FCEL) Use Debt?
David Iben put it well when he said, “Volatility is not a risk we care about. What matters to us is to avoid the permanent loss of capital. ‘ It is only natural to consider a company’s balance sheet when looking at its level of risk, as debt is often involved when a business collapses. Above all, FuelCell Energy, Inc. (NASDAQ: FCEL) is in debt. But should shareholders be concerned about its use of debt?
Why Does Debt Bring Risk?
Generally speaking, debt only becomes a real problem when a company cannot repay it easily, either by raising capital or with its own cash flow. An integral part of capitalism is the process of “creative destruction” where bankrupt companies are ruthlessly liquidated by their bankers. However, a more common (but still painful) scenario is that he must raise new equity at low cost, thereby diluting shareholders over the long term. Of course, many companies use debt to finance their growth without negative consequences. When we look at debt levels, we first look at cash and debt levels, together.
See our latest review for FuelCell Energy
What is FuelCell Energy’s debt?
The image below, which you can click for more details, shows that FuelCell Energy had a debt of $ 32.8 million at the end of July 2021, a reduction from $ 135.4 million. US over one year. However, it has US $ 468.6 million in cash offsetting this, leading to net cash of US $ 435.8 million.
How healthy is FuelCell Energy’s track record?
We can see from the most recent balance sheet that FuelCell Energy had liabilities of US $ 43.0 million due within one year and liabilities of US $ 110.6 million due beyond. . In compensation for these obligations, it had cash of US $ 468.6 million as well as receivables valued at US $ 22.9 million within 12 months. So he actually has $ 337.9 million Following liquid assets as total liabilities.
This short-term liquidity is a sign that FuelCell Energy could probably pay off its debt easily, as its balance sheet is far from tight. In short, FuelCell Energy has clean cash flow, so it’s fair to say it doesn’t have a lot of debt! When analyzing debt levels, the balance sheet is the obvious starting point. But ultimately, the company’s future profitability will decide whether FuelCell Energy can strengthen its balance sheet over time. So if you are focused on the future you can check this out free report showing analysts’ earnings forecasts.
Over the past year, FuelCell Energy has not been profitable on EBIT level, but has managed to increase its revenue by 12%, to US $ 73 million. We generally like to see unprofitable businesses growing faster, but each in their own way.
So how risky is FuelCell energy?
We are convinced that loss-making companies are, in general, riskier than profitable ones. And the point is that over the past twelve months, FuelCell Energy has lost money in earnings before interest and taxes (EBIT). Indeed, during that time, it burned $ 125 million in cash and recorded a loss of $ 99 million. Since it only has net cash of $ 435.8 million, the company may need to raise more capital if it doesn’t break even soon. Even if its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company does not produce regular free cash flow. The balance sheet is clearly the area you need to focus on when analyzing debt. But at the end of the day, every business can contain risks that exist off the balance sheet. For example, we discovered 3 warning signs for FuelCell Energy which you should know before investing here.
If you are interested in investing in companies that can generate profits without the burden of debt, check out this page. free list of growing companies that have net cash on the balance sheet.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in the mentioned stocks.
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