Is AtriCure (NASDAQ:ATRC) Weighed On By Its Debt Load?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 AtriCure, Inc. (NASDAQ:ATRC) 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. If things get really bad, the lenders can take control of the business. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for AtriCure

What Is AtriCure's Net Debt?

As you can see below, AtriCure had US$59.8m of debt, at March 2022, which is about the same as the year before. You can click the chart for greater detail. However, its balance sheet shows it holds US$111.4m in cash, so it actually has US$51.5m net cash.

How Strong Is AtriCure's Balance Sheet?

According to the last reported balance sheet, AtriCure had liabilities of US$47.4m due within 12 months, and liabilities of US$74.8m due beyond 12 months. Offsetting this, it had US$111.4m in cash and US$40.9m in receivables that were due within 12 months. So it actually has US$30.1m more liquid assets than total liabilities.

This state of affairs indicates that AtriCure's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the US$1.95b company is struggling for cash, we still think it's worth monitoring its balance sheet. Simply put, the fact that AtriCure has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine AtriCure'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.

Over 12 months, AtriCure reported revenue of US$290m, which is a gain of 36%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

So How Risky Is AtriCure?

Although AtriCure had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of US$52m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. We think its revenue growth of 36% is a good sign. There's no doubt fast top line growth can cure all manner of ills, for a stock. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. We've identified 2 warning signs with AtriCure (at least 1 which is concerning) , and understanding them should be part of your investment process.

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.