Las Vegas Sands (NYSE:LVS) Is Carrying A Fair Bit Of Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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. As with many other companies Las Vegas Sands Corp. (NYSE:LVS) makes use of debt. But the more important question is: how much risk is that debt creating?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

Check out our latest analysis for Las Vegas Sands

What Is Las Vegas Sands's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2021 Las Vegas Sands had US$14.5b of debt, an increase on US$13.9b, over one year. However, it also had US$1.64b in cash, and so its net debt is US$12.9b.

A Look At Las Vegas Sands' Liabilities

According to the last reported balance sheet, Las Vegas Sands had liabilities of US$2.49b due within 12 months, and liabilities of US$15.0b due beyond 12 months. Offsetting these obligations, it had cash of US$1.64b as well as receivables valued at US$167.0m due within 12 months. So its liabilities total US$15.7b more than the combination of its cash and short-term receivables.

This deficit isn't so bad because Las Vegas Sands is worth a massive US$32.6b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Las Vegas Sands's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

In the last year Las Vegas Sands had a loss before interest and tax, and actually shrunk its revenue by 9.6%, to US$4.9b. That's not what we would hope to see.

Caveat Emptor

Importantly, Las Vegas Sands had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at US$929m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through US$1.2b of cash over the last year. So suffice it to say we do consider the stock to be risky. 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 1 warning sign for Las Vegas Sands that you should be aware of.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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