AptaBio Therapeutics (KOSDAQ:293780) May Not Be Profitable But It Seems To Be Managing Its Debt Just Fine, Anyway

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that AptaBio Therapeutics Inc. (KOSDAQ:293780) does use debt in its business. But is this debt a concern to shareholders?

When Is Debt A Problem?

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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

Check out our latest analysis for AptaBio Therapeutics

How Much Debt Does AptaBio Therapeutics Carry?

The image below, which you can click on for greater detail, shows that AptaBio Therapeutics had debt of ₩15.4b at the end of June 2024, a reduction from ₩16.6b over a year. But it also has ₩48.9b in cash to offset that, meaning it has ₩33.5b net cash.

How Strong Is AptaBio Therapeutics' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that AptaBio Therapeutics had liabilities of ₩2.16b due within 12 months and liabilities of ₩36.0b due beyond that. On the other hand, it had cash of ₩48.9b and ₩2.54b worth of receivables due within a year. So it can boast ₩13.2b more liquid assets than total liabilities.

This surplus suggests that AptaBio Therapeutics has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, AptaBio Therapeutics boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is AptaBio Therapeutics's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

In the last year AptaBio Therapeutics wasn't profitable at an EBIT level, but managed to grow its revenue by 3,919%, to ₩2.1b. That's virtually the hole-in-one of revenue growth!

So How Risky Is AptaBio Therapeutics?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months AptaBio Therapeutics lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of ₩17b and booked a ₩15b accounting loss. But the saving grace is the ₩33.5b on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. The good news for shareholders is that AptaBio Therapeutics has dazzling revenue growth, so there's a very good chance it can boost its free cash flow in the years to come. While unprofitable companies can be risky, they can also grow hard and fast in those pre-profit years. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that AptaBio Therapeutics is showing 4 warning signs in our investment analysis , you should know about...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.