Howard Marks put it right when he said that, rather than worrying about stock price volatility, “the possibility of permanent loss is the risk that concerns me … and every investor I practice. know worries. So it seems like smart money knows that debt – which is usually linked to bankruptcies – is a very important factor when you assess the risk of a business. Mostly, Bionano Genomics, Inc. (NASDAQ: BNGO) is in debt. But does this debt worry shareholders?

When is debt dangerous?

Generally speaking, debt only becomes a real problem when a business cannot easily repay it, either by raising capital or with its own cash flow. An integral part of capitalism is the process of “creative destruction” where bankrupt companies are ruthlessly liquidated by their bankers. However, a more common (but still painful) scenario is that he has to raise new equity at low cost, thereby constantly diluting shareholders. Of course, many companies use debt to finance growth without any negative consequences. When we look at debt levels, we first look at cash and debt levels, together.

Check out our latest review for Bionano Genomics

What is the debt of Bionano Genomics?

The image below, which you can click for more details, shows that Bionano Genomics had a debt of US $ 14.9 million at the end of March 2021, a reduction of US $ 17.0 million. over a year. But on the other hand, it also has US $ 362.1 million in cash, which leads to a net cash position of US $ 347.2 million.

A look at the responsibilities of Bionano Genomics

Zooming in on the latest balance sheet data, we can see that Bionano Genomics had liabilities of $ 7.17 million due within 12 months and liabilities of $ 15.0 million beyond. In return, it had $ 362.1 million in cash and $ 1.99 million in receivables due within 12 months. So he actually has US $ 341.9 million After liquid assets than total liabilities.

This surplus suggests that Bionano Genomics is using debt in a way that seems both safe and conservative. Due to its strong net asset position, it should not encounter any problems with its lenders. Put simply, the fact that Bionano Genomics has more cash than debt is arguably a good indication that it can safely manage its debt. When analyzing debt levels, the balance sheet is the obvious starting point. But it is future profits, more than anything, that will determine Bionano Genomics’ ability to maintain a healthy balance sheet going forward. So if you are focused on the future you can check out this free report showing analysts’ earnings forecasts.

Over 12 months, Bionano Genomics reported revenue of US $ 11 million, a gain of 12%, although it reported no profit before interest and taxes. We generally like to see unprofitable businesses growing faster, but each in their own.

So how risky is Bionano Genomics?

We are convinced that loss-making companies are, in general, riskier than profitable ones. And we note that Bionano Genomics recorded a loss of earnings before interest and taxes (EBIT) over the past year. Indeed, during this period, he burned US $ 44 million in cash and made a loss of US $ 41 million. Since it only has a net cash position of US $ 347.2 million, the company may need to raise more capital if it does not hit breakeven soon. Even if its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company does not regularly generate free cash flow. When analyzing debt levels, the balance sheet is the obvious starting point. However, not all investment risks lie on the balance sheet – far from it. To this end, you should inquire about the 3 warning signs we spotted with Bionano Genomics (including 1 which is worrying).

At the end of the day, it’s often best to focus on businesses with no net debt. You can access our special list of these companies (all with a history of profit growth). It’s free.

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