Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that NN, Inc. (NASDAQ:NNBR) does have debt on its balance sheet. But is this debt a concern to shareholders?

When Is Debt Dangerous?

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. If things get really bad, the lenders can take control of the business. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does NN Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 NN had US$151.3m of debt, an increase on US$137.5m, over one year. However, it also had US$11.7m in cash, and so its net debt is US$139.6m.

How Strong Is NN's Balance Sheet?

According to the last reported balance sheet, NN had liabilities of US$90.1m due within 12 months, and liabilities of US$205.4m due beyond 12 months. On the other hand, it had cash of US$11.7m and US$80.4m worth of receivables due within a year. So its liabilities total US$203.3m more than the combination of its cash and short-term receivables.

This deficit casts a shadow over the US$91.3m company, like a colossus towering over mere mortals. So we definitely think shareholders need to watch this one closely. At the end of the day, NN would probably need a major re-capitalization if its creditors were to demand repayment. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine NN'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.

In the last year NN had a loss before interest and tax, and actually shrunk its revenue by 7.2%, to US$449m. We would much prefer see growth.

Caveat Emptor

Over the last twelve months NN produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable US$21m at the EBIT level. 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 burned through US$9.7m in negative free cash flow over the last year. So suffice it to say we consider the stock to be risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet.

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.