Does Valiant Laboratories (NSE:VALIANTLAB) Have A Healthy Balance Sheet?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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. We can see that Valiant Laboratories Limited (NSE:VALIANTLAB) does use debt in its business. But the real question is whether this debt is making the company risky.

When Is Debt Dangerous?

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. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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.

View our latest analysis for Valiant Laboratories

What Is Valiant Laboratories's Debt?

As you can see below, at the end of March 2024, Valiant Laboratories had ₹760.5m of debt, up from ₹594.0m a year ago. Click the image for more detail. However, its balance sheet shows it holds ₹1.44b in cash, so it actually has ₹677.7m net cash.

How Strong Is Valiant Laboratories' Balance Sheet?

According to the last reported balance sheet, Valiant Laboratories had liabilities of ₹290.8m due within 12 months, and liabilities of ₹767.5m due beyond 12 months. Offsetting this, it had ₹1.44b in cash and ₹457.6m in receivables that were due within 12 months. So it can boast ₹837.5m more liquid assets than total liabilities.

This surplus suggests that Valiant Laboratories has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Valiant Laboratories boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Valiant Laboratories will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Over 12 months, Valiant Laboratories made a loss at the EBIT level, and saw its revenue drop to ₹1.8b, which is a fall of 64%. That makes us nervous, to say the least.

So How Risky Is Valiant Laboratories?

Although Valiant Laboratories had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of ₹3.2m. So when you consider it has net cash, along with the statutory profit, the stock probably isn't as risky as it might seem, at least in the short term. With mediocre revenue growth in the last year, we're don't find the investment opportunity particularly compelling. 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. For instance, we've identified 4 warning signs for Valiant Laboratories (2 make us uncomfortable) you should be aware of.

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.

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