Does EBR Systems (ASX:EBR) Have A Healthy Balance Sheet?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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 EBR Systems, Inc. (ASX:EBR) makes use of debt. But the real question is whether this debt is making the company risky.

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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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does EBR Systems Carry?

As you can see below, EBR Systems had US$40.6m of debt, at June 2025, which is about the same as the year before. You can click the chart for greater detail. But on the other hand it also has US$81.7m in cash, leading to a US$41.1m net cash position.

How Strong Is EBR Systems' Balance Sheet?

The latest balance sheet data shows that EBR Systems had liabilities of US$9.69m due within a year, and liabilities of US$55.5m falling due after that. Offsetting this, it had US$81.7m in cash and US$2.10m in receivables that were due within 12 months. So it can boast US$18.6m more liquid assets than total liabilities.

This short term liquidity is a sign that EBR Systems could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, EBR Systems 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 EBR Systems 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.

View our latest analysis for EBR Systems

Since EBR Systems doesn't have significant operating revenue, shareholders must hope it'll ramp sales of its new medical tech as soon as possible.

So How Risky Is EBR Systems?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that EBR Systems had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of US$47m and booked a US$43m accounting loss. But at least it has US$41.1m on the balance sheet to spend on growth, near-term. 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. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 4 warning signs for EBR Systems you should be aware of, and 3 of them are concerning.

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.

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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.