Yahoo Finance Does SilverCrest Metals (TSE:SIL) Have A Healthy Balance Sheet?
Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, SilverCrest Metals Inc. (TSE:SIL) does carry debt. But the real question is whether this debt is making the company risky.
What Risk Does Debt Bring?
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. If things get really bad, the lenders can take control of the business. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. 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 SilverCrest Metals
What Is SilverCrest Metals's Net Debt?
You can click the graphic below for the historical numbers, but it shows that as of December 2021 SilverCrest Metals had US$87.2m of debt, an increase on US$29.0m, over one year. However, its balance sheet shows it holds US$176.5m in cash, so it actually has US$89.3m net cash.
How Healthy Is SilverCrest Metals' Balance Sheet?
We can see from the most recent balance sheet that SilverCrest Metals had liabilities of US$10.6m falling due within a year, and liabilities of US$90.1m due beyond that. Offsetting this, it had US$176.5m in cash and US$10.3m in receivables that were due within 12 months. So it actually has US$86.1m more liquid assets than total liabilities.
This short term liquidity is a sign that SilverCrest Metals could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, SilverCrest Metals boasts net cash, so it's fair to say it does not have a heavy debt load! 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 SilverCrest Metals'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.
Since SilverCrest Metals has no significant operating revenue, shareholders probably hope it will develop a valuable new mine before too long.
So How Risky Is SilverCrest Metals?
We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that SilverCrest Metals had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of US$153m and booked a US$23m accounting loss. But at least it has US$89.3m on the balance sheet to spend on growth, near-term. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 2 warning signs for SilverCrest Metals you should be aware of, and 1 of them can't be ignored.
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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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.
