Does Biotalys (EBR:BTLS) 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. We note that Biotalys NV (EBR:BTLS) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is Biotalys's Net Debt?

The image below, which you can click on for greater detail, shows that Biotalys had debt of €2.46m at the end of December 2024, a reduction from €2.89m over a year. But on the other hand it also has €22.6m in cash, leading to a €20.2m net cash position.

How Strong Is Biotalys' Balance Sheet?

The latest balance sheet data shows that Biotalys had liabilities of €4.77m due within a year, and liabilities of €4.38m falling due after that. Offsetting this, it had €22.6m in cash and €970.0k in receivables that were due within 12 months. So it can boast €14.5m more liquid assets than total liabilities.

This short term liquidity is a sign that Biotalys could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Biotalys 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 it is future earnings, more than anything, that will determine Biotalys's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

See our latest analysis for Biotalys

Given it has no significant operating revenue at the moment, shareholders will be hoping Biotalys can make progress and gain better traction for the business, before it runs low on cash.

So How Risky Is Biotalys?

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 Biotalys lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of €13m and booked a €13m accounting loss. But at least it has €20.2m on the balance sheet to spend on growth, near-term. 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. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example Biotalys has 4 warning signs (and 3 which are significant) we think you should know about.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.