Does Universal Ibogaine (CVE:IBO) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies Universal Ibogaine Inc. (CVE:IBO) makes use of debt. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

What Is Universal Ibogaine's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Universal Ibogaine had CA$2.53m of debt in January 2025, down from CA$2.70m, one year before. However, it also had CA$274.1k in cash, and so its net debt is CA$2.26m.

A Look At Universal Ibogaine's Liabilities

Zooming in on the latest balance sheet data, we can see that Universal Ibogaine had liabilities of CA$973.9k due within 12 months and liabilities of CA$2.47m due beyond that. Offsetting this, it had CA$274.1k in cash and CA$188.5k in receivables that were due within 12 months. So it has liabilities totalling CA$2.98m more than its cash and near-term receivables, combined.

Universal Ibogaine has a market capitalization of CA$6.94m, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Universal Ibogaine will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for Universal Ibogaine

In the last year Universal Ibogaine had a loss before interest and tax, and actually shrunk its revenue by 15%, to CA$1.9m. That's not what we would hope to see.

Caveat Emptor

While Universal Ibogaine's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Its EBIT loss was a whopping CA$1.1m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through CA$1.1m of cash over the last year. So suffice it to say we consider the stock very risky. 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 4 warning signs for Universal Ibogaine (of which 3 shouldn't be ignored!) you should know about.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.