Here's Why AptaBio Therapeutics (KOSDAQ:293780) Can Manage Its Debt Despite Losing Money

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.' 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 AptaBio Therapeutics Inc. (KOSDAQ:293780) does use debt in its business. But the more important question is: how much risk is that debt creating?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

See our latest analysis for AptaBio Therapeutics

What Is AptaBio Therapeutics's Net Debt?

As you can see below, at the end of December 2023, AptaBio Therapeutics had ₩13.6b of debt, up from none a year ago. Click the image for more detail. But it also has ₩52.9b in cash to offset that, meaning it has ₩39.3b 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 ₩818.0m due within 12 months and liabilities of ₩37.4b due beyond that. Offsetting this, it had ₩52.9b in cash and ₩2.66b in receivables that were due within 12 months. So it actually has ₩17.4b 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 you can't view debt in total isolation; since AptaBio Therapeutics will need earnings to service that debt. 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 570%, to ₩324m. When it comes to revenue growth, that's like nailing the game winning 3-pointer!

So How Risky Is AptaBio Therapeutics?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that AptaBio Therapeutics had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of ₩15b and booked a ₩19b accounting loss. But the saving grace is the ₩39.3b on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Importantly, AptaBio Therapeutics's revenue growth is hot to trot. High growth pre-profit companies may well be risky, but they can also offer great rewards. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 3 warning signs for AptaBio Therapeutics you should be aware of, and 1 of them can't be ignored.

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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