Is Burcon NutraScience (TSE:BU) A Risky Investment?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Burcon NutraScience Corporation (TSE:BU) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

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. 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. 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.

How Much Debt Does Burcon NutraScience Carry?

The image below, which you can click on for greater detail, shows that at March 2025 Burcon NutraScience had debt of CA$7.88m, up from CA$6.40m in one year. However, it also had CA$7.28m in cash, and so its net debt is CA$601.6k.

How Healthy Is Burcon NutraScience's Balance Sheet?

According to the last reported balance sheet, Burcon NutraScience had liabilities of CA$4.29m due within 12 months, and liabilities of CA$19.4m due beyond 12 months. Offsetting these obligations, it had cash of CA$7.28m as well as receivables valued at CA$132.0k due within 12 months. So it has liabilities totalling CA$16.3m more than its cash and near-term receivables, combined.

Burcon NutraScience has a market capitalization of CA$54.2m, 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. Carrying virtually no net debt, Burcon NutraScience has a very light debt load indeed. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Burcon NutraScience'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.

View our latest analysis for Burcon NutraScience

It seems likely shareholders hope that Burcon NutraScience can significantly advance the business plan before too long, because it doesn't have any significant revenue at the moment.

Caveat Emptor

Over the last twelve months Burcon NutraScience produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable CA$7.7m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through CA$5.8m of cash over the last year. So suffice it to say we consider the stock very risky. 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. To that end, you should learn about the 4 warning signs we've spotted with Burcon NutraScience (including 2 which are concerning) .

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.