Profound Medical (TSE:PRN) May Not Be Profitable But It Seems To Be Managing Its Debt Just Fine, Anyway

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, Profound Medical Corp. (TSE:PRN) does carry debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

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. If things get really bad, the lenders can take control of the business. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Profound Medical's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Profound Medical had US$4.46m of debt in June 2025, down from US$5.97m, one year before. But it also has US$35.2m in cash to offset that, meaning it has US$30.7m net cash.

How Strong Is Profound Medical's Balance Sheet?

We can see from the most recent balance sheet that Profound Medical had liabilities of US$5.72m falling due within a year, and liabilities of US$4.69m due beyond that. Offsetting these obligations, it had cash of US$35.2m as well as receivables valued at US$4.90m due within 12 months. So it can boast US$29.7m more liquid assets than total liabilities.

This surplus suggests that Profound Medical is using debt in a way that is appears to be both safe and conservative. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Simply put, the fact that Profound Medical 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 Profound Medical 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.

See our latest analysis for Profound Medical

In the last year Profound Medical wasn't profitable at an EBIT level, but managed to grow its revenue by 60%, to US$12m. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is Profound Medical?

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 Profound Medical had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through US$35m of cash and made a loss of US$41m. However, it has net cash of US$30.7m, so it has a bit of time before it will need more capital. Profound Medical's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. 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. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Profound Medical (of which 1 makes us a bit uncomfortable!) you should know about.

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.

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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.