Does Boston Kelowna (NASDAQ: BOMN) use debt properly?

Outside fund manager, assisted by Charlie Munger of Berkshire Hathaway, Li Lu, doesn’t care if he says, “The greatest risk to investment is not price volatility, it is whether you experience permanent capital loss.” So it seems that the smart money knows that debt – which is usually associated with bankruptcies – is a very important factor in assessing how risky a business is. As with many other companies Boston Kelowna Corporation (NASDAQ: BOMN) takes advantage of debt. But is this debt a concern of shareholders?

When is debt a problem?

In general, debt only becomes a real problem if a company cannot pay it off simply by raising capital or using its own cash flow. Ultimately, if the company fails to meet its legal debt repayment obligations, shareholders cannot get away with anything. However, a more common (but still costly) occurrence is when a company needs to issue stocks at cheap prices and permanently dilute shareholders in order to prop up its balance sheet. However, the most common situation is that a company is managing its debt reasonably well – and for its own benefit. The first step in looking at a company’s debt is to look at its cash and debt together.

Check out our latest analysis for Boston Kelowna

What is the Boston Kelowna Net Debt?

You can click the graph below to view the historical numbers. However, it shows that Boston Kelowna had $ 23.4 million in debt in September 2020, an increase of $ 18.1 million over a year. On the other hand, it also has $ 190.0 million in cash, resulting in a net cash position of $ 166.7 million.

NasdaqCM: BOMN Debt to Equity History January 10, 2021

A look at Boston Kelowna liabilities

The latest balance sheet data shows that Boston Kelowna had liabilities of $ 24.6 million due within one year and liabilities of $ 69.9 million were due thereafter. This was offset by cash of $ 190.0 million and receivables of $ 3.65 million due within 12 months. So it actually has $ 99.3 million more cash than its total debt.

This short-term liquidity is a sign that Boston Kelowna could likely easily pay off its debts, given that its balance sheet is nowhere near congested. In short, Boston Kelowna has net cash, so it’s fair to say it doesn’t have a heavy debt burden! When analyzing debt, the obvious starting point is the balance sheet. Most of all, future profits will determine Boston Kelowna’s ability to maintain a healthy balance sheet going forward. So if your focus is on the future, this is what you can check out free Report with earnings forecast by analysts.

Last year Boston Kelowna was not profitable on an EBIT level, but was able to increase its sales by 18% to $ 46 million. We usually want unprofitable companies to grow faster, but each one in itself.

How Risky is Boston Kelowna?

While Boston Kelowna lost money on earnings before interest and taxes (EBIT), it actually generated positive free cash flow of $ 1.2 million. When we put that at par and factor in the net cash position, we don’t think the stock is too risky in the short term. Given the mediocre sales growth last year, we don’t find the investment opportunity particularly convincing. When analyzing debt, the obvious starting point is the balance sheet. Ultimately, however, any business may involve off-balance sheet risks. For example, take risks – Boston has Kelowna 3 warning signs (and 1 that can’t be ignored) We think you should know about this.

Of course, if you’re an investor who prefers to buy stocks with no debt burden, don’t hesitate to discover our exclusive list of Net Cash Growth stocks today.

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This article from Simply Wall St is of a general nature. It is not a recommendation to buy or sell stocks and does not take into account your goals or your financial situation. We want to provide you with a long-term, focused analysis based on fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or quality materials. Simply Wall St has no position in the stocks mentioned.
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