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. Importantly, Apyx Medical Corporation (NASDAQ:APYX) does carry 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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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. When we examine debt levels, we first consider both cash and debt levels, together.
See our latest analysis for Apyx Medical
What Is Apyx Medical's Debt?
You can click the graphic below for the historical numbers, but it shows that as of June 2023 Apyx Medical had US$8.89m of debt, an increase on none, over one year. But on the other hand it also has US$18.5m in cash, leading to a US$9.59m net cash position.
A Look At Apyx Medical's Liabilities
Zooming in on the latest balance sheet data, we can see that Apyx Medical had liabilities of US$19.0m due within 12 months and liabilities of US$6.67m due beyond that. Offsetting this, it had US$18.5m in cash and US$20.1m in receivables that were due within 12 months. So it can boast US$12.9m more liquid assets than total liabilities.
This short term liquidity is a sign that Apyx Medical could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Apyx Medical boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Apyx Medical'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 Apyx Medical had a loss before interest and tax, and actually shrunk its revenue by 7.8%, to US$47m. That's not what we would hope to see.
So How Risky Is Apyx Medical?
Statistically speaking companies that lose money are riskier than those that make money. And in the last year Apyx Medical had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of US$17m and booked a US$16m accounting loss. But at least it has US$9.59m on the balance sheet to spend on growth, near-term. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. 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. Be aware that Apyx Medical is showing 3 warning signs in our investment analysis , and 1 of those is significant...
If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.
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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.
About NasdaqGS:APYX
Apyx Medical
An energy technology company, engages in the design, development, and manufacture of medical devices in the United States and internationally.
Undervalued with excellent balance sheet.