Warren Buffett famously said, '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 Maravai LifeSciences Holdings, Inc. (NASDAQ:MRVI) 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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.
How Much Debt Does Maravai LifeSciences Holdings Carry?
As you can see below, Maravai LifeSciences Holdings had US$524.1m of debt, at December 2023, which is about the same as the year before. You can click the chart for greater detail. But it also has US$575.0m in cash to offset that, meaning it has US$50.8m net cash.
A Look At Maravai LifeSciences Holdings' Liabilities
The latest balance sheet data shows that Maravai LifeSciences Holdings had liabilities of US$87.5m due within a year, and liabilities of US$610.1m falling due after that. On the other hand, it had cash of US$575.0m and US$55.7m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$66.9m.
Of course, Maravai LifeSciences Holdings has a market capitalization of US$2.14b, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, Maravai LifeSciences Holdings boasts net cash, so it's fair to say it does not have a heavy debt load! 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 Maravai LifeSciences Holdings'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 Maravai LifeSciences Holdings had a loss before interest and tax, and actually shrunk its revenue by 67%, to US$289m. That makes us nervous, to say the least.
So How Risky Is Maravai LifeSciences Holdings?
Although Maravai LifeSciences Holdings had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of US$61m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. Until we see some positive EBIT, we're a bit cautious of the stock, not least because of the rather modest revenue growth. 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 1 warning sign for Maravai LifeSciences Holdings that you should be aware of before investing here.
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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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.