DMG Blockchain Solutions: Debt Risks and Concerns
DMG Blockchain Solutions Inc. (CVE:DMGI) has been making use of debt, like many companies. But the question is, how much risk does this debt create?
Debt and Risk
Debt can become a problem for a company when it can’t easily pay it off. This can lead to the company having to raise capital at a distressed price, which can dilute shareholder value. In the worst-case scenario, a company can go bankrupt.
DMG Blockchain Solutions’ Debt
As of March 2024, DMG Blockchain Solutions had CA$12.1m of debt. However, it also had CA$2.11m in cash, resulting in a net debt of CA$10.0m.
Balance Sheet Analysis
DMG Blockchain Solutions had CA$17.7m in liabilities due within a year and CA$71.9k in liabilities due after that. While it had CA$2.11m in cash and CA$2.10m in receivables due within 12 months, its liabilities still exceeded its cash and short-term receivables by CA$13.5m.
The company’s market capitalization of CA$93.4m suggests that these liabilities might not pose a significant threat. However, it’s important to continue monitoring the company’s balance sheet for any changes.
Earnings and Free Cash Flow
Over the past 12 months, DMG Blockchain Solutions generated CA$33m in revenue, representing a 3.1% increase. However, the company did not report any earnings before interest and tax (EBIT).
The company reported a whopping CA$12m EBIT loss, which coupled with its liabilities, makes it seem unwise for the company to have any debt. It’s fair to say the balance sheet isn’t in a good position, although it could improve over time.
DMG Blockchain Solutions also had a negative free cash flow of CA$14m over the past twelve months. This points to a riskier investment.
Overall Assessment
While the balance sheet can reveal a lot about a company’s debt levels, it’s crucial to remember that risks can exist outside of it. DMG Blockchain Solutions presents several warning signs that investors should be aware of before investing. If you are looking for businesses that can grow without the burden of debt, you might want to consider exploring other options.
Ultimately, evaluating DMG Blockchain Solutions requires a comprehensive analysis, considering factors like fair value estimates, risks, and financial health.
