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Here's Why Green Thumb Industries (CSE:GTII) Can Manage Its Debt Responsibly

Simply Wall St · 5d ago

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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 Green Thumb Industries Inc. (CSE:GTII) does use debt in its business. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Green Thumb Industries's Net Debt?

The chart below, which you can click on for greater detail, shows that Green Thumb Industries had US$247.4m in debt in September 2025; about the same as the year before. However, it does have US$226.2m in cash offsetting this, leading to net debt of about US$21.2m.

debt-equity-history-analysis
CNSX:GTII Debt to Equity History January 6th 2026

How Strong Is Green Thumb Industries' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Green Thumb Industries had liabilities of US$241.6m due within 12 months and liabilities of US$562.7m due beyond that. On the other hand, it had cash of US$226.2m and US$61.4m worth of receivables due within a year. So it has liabilities totalling US$516.7m more than its cash and near-term receivables, combined.

This deficit isn't so bad because Green Thumb Industries is worth US$1.80b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. But either way, Green Thumb Industries has virtually no net debt, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Green Thumb Industries

We measure a company's debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.

Green Thumb Industries has very little debt (net of cash), and boasts a debt to EBITDA ratio of 0.072 and EBIT of 15.6 times the interest expense. So relative to past earnings, the debt load seems trivial. On the other hand, Green Thumb Industries's EBIT dived 20%, over the last year. If that rate of decline in earnings continues, the company could find itself in a tight spot. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Green Thumb Industries'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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. So the logical step is to look at the proportion of that EBIT that is matched by actual free cash flow. In the last three years, Green Thumb Industries's free cash flow amounted to 46% of its EBIT, less than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Our View

Both Green Thumb Industries's ability to to cover its interest expense with its EBIT and its net debt to EBITDA gave us comfort that it can handle its debt. But truth be told its EBIT growth rate had us nibbling our nails. Looking at all this data makes us feel a little cautious about Green Thumb Industries's debt levels. While we appreciate debt can enhance returns on equity, we'd suggest that shareholders keep close watch on its debt levels, lest they increase. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For example - Green Thumb Industries has 3 warning signs we think you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.