Health Check: How Prudently Does Vext Science (CSE:VEXT) Use Debt?

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.' 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, Vext Science, Inc. (CSE:VEXT) does carry debt. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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.

How Much Debt Does Vext Science Carry?

The image below, which you can click on for greater detail, shows that Vext Science had debt of US$33.9m at the end of March 2025, a reduction from US$35.8m over a year. However, it also had US$4.83m in cash, and so its net debt is US$29.0m.

How Strong Is Vext Science's Balance Sheet?

We can see from the most recent balance sheet that Vext Science had liabilities of US$16.0m falling due within a year, and liabilities of US$42.3m due beyond that. Offsetting this, it had US$4.83m in cash and US$1.82m in receivables that were due within 12 months. So its liabilities total US$51.7m more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of US$52.9m, so it does suggest shareholders should keep an eye on Vext Science's use of debt. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Vext Science 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 Vext Science

In the last year Vext Science wasn't profitable at an EBIT level, but managed to grow its revenue by 15%, to US$39m. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Over the last twelve months Vext Science produced an earnings before interest and tax (EBIT) loss. Its EBIT loss was a whopping US$10m. 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. For example, we would not want to see a repeat of last year's loss of US$19m. So in short it's a really risky stock. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 4 warning signs for Vext Science you should be aware of, and 2 of them shouldn't be ignored.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.