Yahoo Finance Here's Why BioCryst Pharmaceuticals (NASDAQ:BCRX) Can Manage Its Debt Despite Losing Money
Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about. 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 can see that BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) does use debt in its business. But should shareholders be worried about its use of debt?
Why Does Debt Bring Risk?
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 frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.
See our latest analysis for BioCryst Pharmaceuticals
How Much Debt Does BioCryst Pharmaceuticals Carry?
You can click the graphic below for the historical numbers, but it shows that as of December 2019 BioCryst Pharmaceuticals had US$79.9m of debt, an increase on US$59.1m, over one year. But on the other hand it also has US$136.2m in cash, leading to a US$56.4m net cash position.
How Strong Is BioCryst Pharmaceuticals's Balance Sheet?
We can see from the most recent balance sheet that BioCryst Pharmaceuticals had liabilities of US$92.3m falling due within a year, and liabilities of US$44.7m due beyond that. Offsetting these obligations, it had cash of US$136.2m as well as receivables valued at US$22.1m due within 12 months. So it can boast US$21.3m more liquid assets than total liabilities.
This surplus suggests that BioCryst Pharmaceuticals has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that BioCryst Pharmaceuticals has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if BioCryst Pharmaceuticals can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.
In the last year BioCryst Pharmaceuticals wasn't profitable at an EBIT level, but managed to grow its revenue by 136%, to US$49m. So its pretty obvious shareholders are hoping for more growth!
So How Risky Is BioCryst Pharmaceuticals?
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 BioCryst Pharmaceuticals lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$90m of cash and made a loss of US$109m. But at least it has US$56.4m on the balance sheet to spend on growth, near-term. The good news for shareholders is that BioCryst Pharmaceuticals has dazzling revenue growth, so there's a very good chance it can boost its free cash flow in the years to come. While unprofitable companies can be risky, they can also grow hard and fast in those pre-profit years. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 3 warning signs for BioCryst Pharmaceuticals you should be aware of.
If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.
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.
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