Is Grown Rogue International (CSE:GRIN) Using Debt Sensibly?

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.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that Grown Rogue International Inc. (CSE:GRIN) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Grown Rogue International's Debt?

The image below, which you can click on for greater detail, shows that at September 2025 Grown Rogue International had debt of US$12.0m, up from US$3.17m in one year. However, it does have US$13.1m in cash offsetting this, leading to net cash of US$1.04m.

A Look At Grown Rogue International's Liabilities

Zooming in on the latest balance sheet data, we can see that Grown Rogue International had liabilities of US$6.66m due within 12 months and liabilities of US$17.0m due beyond that. Offsetting these obligations, it had cash of US$13.1m as well as receivables valued at US$10.1m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$473.7k.

Having regard to Grown Rogue International's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the US$118.7m company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, Grown Rogue International 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 you can't view debt in total isolation; since Grown Rogue International will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for Grown Rogue International

In the last year Grown Rogue International had a loss before interest and tax, and actually shrunk its revenue by 14%, to US$22m. We would much prefer see growth.

So How Risky Is Grown Rogue International?

While Grown Rogue International lost money on an earnings before interest and tax (EBIT) level, it actually booked a paper profit of US$6.4m. So when you consider it has net cash, along with the statutory profit, the stock probably isn't as risky as it might seem, at least in the short term. Until we see some positive EBIT, we're a bit cautious of the stock, not least because of the rather modest revenue growth. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example - Grown Rogue International has 1 warning sign we think you should be aware of.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.