Amid the Bellamy's Australia ownership scrap, investors haven't stopped thinking about the company's balance sheet.
Goldman Sachs analysts weighed into the debate on Wednesday morning saying the potential for a raising would weigh on Bellamy's shares.
However, the analysts reckon Bellamy's should be able to generate enough cash to avoid tapping shareholders for fresh funds.
"With visibility on BAL's future revenue/earnings profile remaining low and volatility remaining high, we believe the prospect of a future equity raise will remain an overhang for the stock," the analysts told clients.
"We do not include an equity raise in our base case as we assume that the business will be able to generate sufficient positive cashflows and control inventory in order to keep its debt position manageable.
"However, we highlight that a 10% drop in FY18E revenues from our base case to our downside case suggests an elevated gearing ratio (Net Debt/EBIT) of >10x in FY18E and 2.8x in FY19E."
Still, Goldman analysts downgraded the stock to "sell" and said Bellamy's may struggle to clear excess inventory, it faced ongoing market share loss and onerous take-or-pay contracts.
The analysts said they would wait for evidence of better than expected sales trends or a less demanding valuation before becoming more positive on the stock.
