Nanobiotix (EPA:NANO) Has Debt But No Earnings; Should You Worry?

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. We can see that Nanobiotix S.A. (EPA:NANO) does use debt in its business. But the real question is whether this debt is making the company risky.

Why Does Debt Bring Risk?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

Check out our latest analysis for Nanobiotix

What Is Nanobiotix's Debt?

As you can see below, Nanobiotix had €45.2m of debt, at June 2021, which is about the same as the year before. You can click the chart for greater detail. However, it does have €102.3m in cash offsetting this, leading to net cash of €57.2m.

How Healthy Is Nanobiotix's Balance Sheet?

The latest balance sheet data shows that Nanobiotix had liabilities of €38.0m due within a year, and liabilities of €44.4m falling due after that. Offsetting these obligations, it had cash of €102.3m as well as receivables valued at €6.29m due within 12 months. So it can boast €26.1m more liquid assets than total liabilities.

This short term liquidity is a sign that Nanobiotix could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Nanobiotix has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Nanobiotix's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Given its lack of meaningful operating revenue, Nanobiotix shareholders no doubt hope it can fund itself until it has a profitable product.

So How Risky Is Nanobiotix?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that Nanobiotix had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through €30m of cash and made a loss of €43m. With only €57.2m on the balance sheet, it would appear that its going to need to raise capital again soon. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. 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. Case in point: We've spotted 5 warning signs for Nanobiotix you should be aware of, and 1 of them is potentially serious.

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.