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 note that BioLife Solutions, Inc. (NASDAQ:BLFS) does have debt on its balance sheet. But is this debt a concern to shareholders?

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. If things get really bad, the lenders can take control of the business. 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 step when considering a company's debt levels is to consider its cash and debt together.

See our latest analysis for BioLife Solutions

How Much Debt Does BioLife Solutions Carry?

The image below, which you can click on for greater detail, shows that BioLife Solutions had debt of US$7.55m at the end of June 2022, a reduction from US$11.3m over a year. But on the other hand it also has US$46.5m in cash, leading to a US$39.0m net cash position.

How Healthy Is BioLife Solutions' Balance Sheet?

We can see from the most recent balance sheet that BioLife Solutions had liabilities of US$33.3m falling due within a year, and liabilities of US$24.8m due beyond that. Offsetting these obligations, it had cash of US$46.5m as well as receivables valued at US$31.3m due within 12 months. So it actually has US$19.7m more liquid assets than total liabilities.

This short term liquidity is a sign that BioLife Solutions could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, BioLife Solutions boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine BioLife Solutions's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Over 12 months, BioLife Solutions reported revenue of US$148m, which is a gain of 100%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is BioLife Solutions?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that BioLife Solutions had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through US$27m of cash and made a loss of US$94m. With only US$39.0m on the balance sheet, it would appear that its going to need to raise capital again soon. BioLife Solutions's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. 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 example, we've discovered 3 warning signs for BioLife Solutions that you should be aware of before investing here.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.