Yahoo Finance Does Tissue Regenix Group (LON:TRX) Have A Healthy Balance Sheet?
David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies Tissue Regenix Group plc (LON:TRX) makes use of debt. But should shareholders be worried about its use of debt?
Why Does Debt Bring Risk?
Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
See our latest analysis for Tissue Regenix Group
What Is Tissue Regenix Group's Debt?
As you can see below, at the end of December 2020, Tissue Regenix Group had UK£2.79m of debt, up from UK£2.29m a year ago. Click the image for more detail. However, its balance sheet shows it holds UK£9.55m in cash, so it actually has UK£6.76m net cash.
A Look At Tissue Regenix Group's Liabilities
The latest balance sheet data shows that Tissue Regenix Group had liabilities of UK£3.26m due within a year, and liabilities of UK£5.62m falling due after that. On the other hand, it had cash of UK£9.55m and UK£2.71m worth of receivables due within a year. So it can boast UK£3.37m more liquid assets than total liabilities.
This surplus suggests that Tissue Regenix Group has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Tissue Regenix Group boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Tissue Regenix Group'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, Tissue Regenix Group saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that's not too bad, we'd prefer see growth.
So How Risky Is Tissue Regenix Group?
Statistically speaking companies that lose money are riskier than those that make money. And in the last year Tissue Regenix Group had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of UK£6.6m and booked a UK£9.7m accounting loss. Given it only has net cash of UK£6.76m, the company may need to raise more capital if it doesn't reach break-even soon. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 3 warning signs we've spotted with Tissue Regenix Group (including 1 which is a bit unpleasant) .
Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.
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. 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.
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