The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. We note that TrueBlue, Inc. (NYSE:TBI) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?
We check all companies for important risks. See what we found for TrueBlue in our free report.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. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
What Is TrueBlue's Debt?
As you can see below, at the end of March 2025, TrueBlue had US$57.8m of debt, up from none a year ago. Click the image for more detail. However, it does have US$23.1m in cash offsetting this, leading to net debt of about US$34.7m.
How Strong Is TrueBlue's Balance Sheet?
According to the last reported balance sheet, TrueBlue had liabilities of US$156.3m due within 12 months, and liabilities of US$233.9m due beyond 12 months. Offsetting this, it had US$23.1m in cash and US$226.7m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$140.5m.
When you consider that this deficiency exceeds the company's US$128.1m market capitalization, you might well be inclined to review the balance sheet intently. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. 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 TrueBlue 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.
Check out our latest analysis for TrueBlue
Over 12 months, TrueBlue made a loss at the EBIT level, and saw its revenue drop to US$1.5b, which is a fall of 17%. We would much prefer see growth.
Caveat Emptor
While TrueBlue's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Its EBIT loss was a whopping US$41m. 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 had negative free cash flow of US$46m over the last twelve months. That means it's on the risky side of things. For riskier companies like TrueBlue 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.
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.