Is American Vanguard (NYSE:AVD) Using Debt In A Risky Way?
David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that American Vanguard Corporation (NYSE:AVD) does use debt in its business. But should shareholders be worried about its use of debt?
What Risk Does Debt Bring?
Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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.
How Much Debt Does American Vanguard Carry?
As you can see below, American Vanguard had US$189.5m of debt at June 2025, down from US$211.3m a year prior. However, because it has a cash reserve of US$14.5m, its net debt is less, at about US$175.0m.
How Strong Is American Vanguard's Balance Sheet?
According to the last reported balance sheet, American Vanguard had liabilities of US$208.7m due within 12 months, and liabilities of US$212.4m due beyond 12 months. Offsetting these obligations, it had cash of US$14.5m as well as receivables valued at US$184.0m due within 12 months. So it has liabilities totalling US$222.7m more than its cash and near-term receivables, combined.
This deficit casts a shadow over the US$139.3m company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. After all, American Vanguard would likely require a major re-capitalisation if it had to pay its creditors today. 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 American Vanguard'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 American Vanguard
Over 12 months, American Vanguard made a loss at the EBIT level, and saw its revenue drop to US$529m, which is a fall of 9.6%. That's not what we would hope to see.
Caveat Emptor
Importantly, American Vanguard had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping US$33m. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. For example, we would not want to see a repeat of last year's loss of US$125m. And until that time we think this is a risky stock. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 1 warning sign for American Vanguard that you should be aware of.
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.