Does Golden Matrix Group (NASDAQ:GMGI) Have A Healthy Balance Sheet?

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 can see that Golden Matrix Group, Inc. (NASDAQ:GMGI) does use debt in its business. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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 Golden Matrix Group's Debt?

As you can see below, at the end of March 2025, Golden Matrix Group had US$28.6m of debt, up from US$4.15m a year ago. Click the image for more detail. But it also has US$30.0m in cash to offset that, meaning it has US$1.43m net cash.

How Healthy Is Golden Matrix Group's Balance Sheet?

We can see from the most recent balance sheet that Golden Matrix Group had liabilities of US$62.0m falling due within a year, and liabilities of US$39.6m due beyond that. Offsetting these obligations, it had cash of US$30.0m as well as receivables valued at US$10.00m due within 12 months. So it has liabilities totalling US$61.6m more than its cash and near-term receivables, combined.

This deficit isn't so bad because Golden Matrix Group is worth US$224.2m, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. While it does have liabilities worth noting, Golden Matrix Group also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Golden Matrix Group's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

View our latest analysis for Golden Matrix Group

In the last year Golden Matrix Group wasn't profitable at an EBIT level, but managed to grow its revenue by 78%, to US$169m. With any luck the company will be able to grow its way to profitability.

So How Risky Is Golden Matrix Group?

Although Golden Matrix Group had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of US$4.0m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. One positive is that Golden Matrix Group is growing revenue apace, which makes it easier to sell a growth story and raise capital if need be. But we still think it's somewhat risky. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 1 warning sign with Golden Matrix Group , and understanding them should be part of your investment process.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.