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.' So it seems the smart money knows that debt – which is usually involved in bankruptcies – is a very important factor, when you assess how risky a company is. As with many other companies SI-BONE, Inc. (NASDAQ:SIBN) makes use of debt. But is this debt a concern to shareholders?
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. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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.
See our latest analysis for SI-BONE
As you can see below, SI-BONE had US$35.1m of debt, at June 2022, which is about the same as the year before. You can click the chart for greater detail. But it also has US$114.4m in cash to offset that, meaning it has US$79.3m net cash.
According to the last reported balance sheet, SI-BONE had liabilities of US$16.7m due within 12 months, and liabilities of US$38.6m due beyond 12 months. Offsetting this, it had US$114.4m in cash and US$15.4m in receivables that were due within 12 months. So it actually has US$74.5m more liquid assets than total liabilities.
This surplus suggests that SI-BONE has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, SI-BONE 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 ultimately the future profitability of the business will decide if SI-BONE 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 SI-BONE wasn't profitable at an EBIT level, but managed to grow its revenue by 12%, to US$96m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.
Statistically speaking companies that lose money are riskier than those that make money. And we do note that SI-BONE had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through US$57m of cash and made a loss of US$66m. While this does make the company a bit risky, it's important to remember it has net cash of US$79.3m. That kitty means the company can keep spending for growth for at least two years, at current rates. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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. For instance, we've identified 3 warning signs for SI-BONE that you should be aware of.
At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Find out whether SI-BONE is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.
SI-BONE, Inc., a medical device company, develops implantable devices used to solve musculoskeletal disorders of the sacropelvic anatomy in the United States and internationally.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
Read more about these checks in the individual report sections or in our analysis model.
Flawless balance sheet and overvalued.
Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.
SI-BONE, Inc., a medical device company, develops implantable devices used to solve musculoskeletal disorders of the sacropelvic anatomy in the United States and internationally.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
Read more about these checks in the individual report sections or in our analysis model.
Flawless balance sheet and overvalued.
Simply Wall Street Pty Ltd (ACN 600 056 611), is a Corporate Authorised Representative (Authorised Representative Number: 467183) of Sanlam Private Wealth Pty Ltd (AFSL No. 337927). Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situation or needs. You should not rely on any advice and/or information contained in this website and before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice. Please read our Financial Services Guide before deciding whether to obtain financial services from us.
About Author
