Health Check: How Prudently Does IRLAB Therapeutics (STO:IRLAB A) Use Debt?

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. Importantly, IRLAB Therapeutics AB (publ) (STO:IRLAB A) does carry debt. But the more important question is: how much risk is that debt creating?

Our free stock report includes 3 warning signs investors should be aware of before investing in IRLAB Therapeutics. Read for free now.

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. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does IRLAB Therapeutics Carry?

The image below, which you can click on for greater detail, shows that at March 2025 IRLAB Therapeutics had debt of kr60.4m, up from kr25.5m in one year. However, its balance sheet shows it holds kr88.6m in cash, so it actually has kr28.2m net cash.

A Look At IRLAB Therapeutics' Liabilities

According to the last reported balance sheet, IRLAB Therapeutics had liabilities of kr152.4m due within 12 months, and liabilities of kr2.68m due beyond 12 months. On the other hand, it had cash of kr88.6m and kr15.6m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by kr50.9m.

Since publicly traded IRLAB Therapeutics shares are worth a total of kr392.1m, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, IRLAB Therapeutics also has more cash than debt, so we're pretty confident it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if IRLAB Therapeutics 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 IRLAB Therapeutics

Over 12 months, IRLAB Therapeutics reported revenue of kr103m, which is a gain of 1,708%, although it did not report any earnings before interest and tax. That's virtually the hole-in-one of revenue growth!

So How Risky Is IRLAB Therapeutics?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year IRLAB Therapeutics had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of kr21m and booked a kr78m accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of kr28.2m. 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 IRLAB Therapeutics has dazzling revenue growth, so there's a very good chance it can boost its free cash flow in the years to come. 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. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 3 warning signs for IRLAB Therapeutics you should be aware of, and 1 of them doesn't sit too well with us.

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.