David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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. As with many other companies Blink Charging Co. (NASDAQ:BLNK) makes use of debt. But the more important question is: how much risk is that debt creating?

When Is Debt A Problem?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Blink Charging's Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2024 Blink Charging had US$6.79m of debt, an increase on US$10.0k, over one year. However, its balance sheet shows it holds US$93.5m in cash, so it actually has US$86.7m net cash.

How Strong Is Blink Charging's Balance Sheet?

According to the last reported balance sheet, Blink Charging had liabilities of US$67.2m due within 12 months, and liabilities of US$40.5m due beyond 12 months. On the other hand, it had cash of US$93.5m and US$53.6m worth of receivables due within a year. So it actually has US$39.3m more liquid assets than total liabilities.

This surplus suggests that Blink Charging has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Blink Charging 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 ultimately the future profitability of the business will decide if Blink Charging can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year Blink Charging wasn't profitable at an EBIT level, but managed to grow its revenue by 114%, to US$156m. So its pretty obvious shareholders are hoping for more growth!

So How Risky Is Blink Charging?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months Blink Charging lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$104m and booked a US$191m accounting loss. Given it only has net cash of US$86.7m, the company may need to raise more capital if it doesn't reach break-even soon. Importantly, Blink Charging's revenue growth is hot to trot. High growth pre-profit companies may well be risky, but they can also offer great rewards. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Blink Charging (of which 1 is significant!) you should know about.

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.