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. Importantly, BioLife Solutions, Inc. (NASDAQ:BLFS) does carry debt. But is this debt a concern to shareholders?
What Risk Does Debt Bring?
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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.
What Is BioLife Solutions's Net Debt?
The chart below, which you can click on for greater detail, shows that BioLife Solutions had US$25.1m in debt in December 2023; about the same as the year before. But it also has US$51.7m in cash to offset that, meaning it has US$26.6m net cash.
How Strong Is BioLife Solutions' Balance Sheet?
The latest balance sheet data shows that BioLife Solutions had liabilities of US$42.2m due within a year, and liabilities of US$32.9m falling due after that. Offsetting this, it had US$51.7m in cash and US$18.7m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$4.70m.
Having regard to BioLife Solutions' size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the US$769.2m company is short on cash, but still worth keeping an eye on the balance sheet. While it does have liabilities worth noting, BioLife Solutions also has more cash than debt, so we're pretty confident it can manage its debt safely. 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.
In the last year BioLife Solutions had a loss before interest and tax, and actually shrunk its revenue by 11%, to US$143m. We would much prefer see growth.
So How Risky Is BioLife Solutions?
By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months BioLife Solutions lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$24m of cash and made a loss of US$66m. However, it has net cash of US$26.6m, so it has a bit of time before it will need more capital. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. To that end, you should be aware of the 1 warning sign we've spotted with BioLife Solutions .
If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.
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