Universal Electronics (NASDAQ:UEIC) Is Making Moderate Use Of Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. Importantly, Universal Electronics Inc. (NASDAQ:UEIC) does carry debt. But should shareholders be worried about its use of debt?

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. 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 examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Universal Electronics Carry?

As you can see below, Universal Electronics had US$31.0m of debt at March 2025, down from US$46.0m a year prior. However, because it has a cash reserve of US$27.4m, its net debt is less, at about US$3.63m.

How Strong Is Universal Electronics' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Universal Electronics had liabilities of US$149.3m due within 12 months and liabilities of US$11.3m due beyond that. Offsetting this, it had US$27.4m in cash and US$117.4m in receivables that were due within 12 months. So it has liabilities totalling US$15.9m more than its cash and near-term receivables, combined.

Since publicly traded Universal Electronics shares are worth a total of US$91.5m, 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. 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 Universal Electronics 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 Universal Electronics

Over 12 months, Universal Electronics made a loss at the EBIT level, and saw its revenue drop to US$395m, which is a fall of 2.1%. That's not what we would hope to see.

Caveat Emptor

Over the last twelve months Universal Electronics produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at US$5.1m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. For example, we would not want to see a repeat of last year's loss of US$22m. In the meantime, we consider the stock very risky. 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. For instance, we've identified 1 warning sign for Universal Electronics that 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.

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.