Yahoo Finance Does Aerie Pharmaceuticals (NASDAQ:AERI) Have A Healthy Balance Sheet?
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. As with many other companies Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) makes use of debt. But is this debt a concern to shareholders?
When Is Debt Dangerous?
Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.
Check out our latest analysis for Aerie Pharmaceuticals
What Is Aerie Pharmaceuticals's Net Debt?
You can click the graphic below for the historical numbers, but it shows that as of September 2019 Aerie Pharmaceuticals had US$183.6m of debt, an increase on none, over one year. But it also has US$340.8m in cash to offset that, meaning it has US$157.2m net cash.
A Look At Aerie Pharmaceuticals's Liabilities
The latest balance sheet data shows that Aerie Pharmaceuticals had liabilities of US$73.0m due within a year, and liabilities of US$197.0m falling due after that. Offsetting this, it had US$340.8m in cash and US$33.3m in receivables that were due within 12 months. So it actually has US$104.1m more liquid assets than total liabilities.
This short term liquidity is a sign that Aerie Pharmaceuticals could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Aerie Pharmaceuticals 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 Aerie Pharmaceuticals'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, Aerie Pharmaceuticals reported revenue of US$60m, which is a gain of 514%, although it did not report any earnings before interest and tax. When it comes to revenue growth, that's like nailing the game winning 3-pointer!
So How Risky Is Aerie Pharmaceuticals?
Statistically speaking companies that lose money are riskier than those that make money. And we do note that Aerie Pharmaceuticals had negative earnings before interest and tax (EBIT), over the last year. Indeed, in that time it burnt through US$165m of cash and made a loss of US$196m. But at least it has US$157.2m on the balance sheet to spend on growth, near-term. Importantly, Aerie Pharmaceuticals's revenue growth is hot to trot. High growth pre-profit companies may well be risky, but they can also offer great rewards. For riskier companies like Aerie Pharmaceuticals I always like to keep an eye on whether insiders are buying or selling. So click here if you want to find out for yourself.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
