Does Aspira Women's Health (NASDAQ:AWH) Have A Healthy Balance Sheet?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. As with many other companies Aspira Women's Health Inc. (NASDAQ:AWH) makes use of debt. But the real question is whether this debt is making the company risky.

Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for Aspira Women's Health

How Much Debt Does Aspira Women's Health Carry?

As you can see below, at the end of March 2021, Aspira Women's Health had US$4.48m of debt, up from US$1.24m a year ago. Click the image for more detail. But on the other hand it also has US$59.4m in cash, leading to a US$54.9m net cash position.

How Strong Is Aspira Women's Health's Balance Sheet?

According to the last reported balance sheet, Aspira Women's Health had liabilities of US$6.15m due within 12 months, and liabilities of US$3.82m due beyond 12 months. On the other hand, it had cash of US$59.4m and US$952.0k worth of receivables due within a year. So it actually has US$50.3m more liquid assets than total liabilities.

This surplus suggests that Aspira Women's Health has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Aspira Women's Health 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 ultimately the future profitability of the business will decide if Aspira Women's Health can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year Aspira Women's Health's revenue was pretty flat, and it made a negative EBIT. While that hardly impresses, its not too bad either.

So How Risky Is Aspira Women's Health?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months Aspira Women's Health lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$17m and booked a US$20m accounting loss. With only US$54.9m on the balance sheet, it would appear that its going to need to raise capital again soon. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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. Case in point: We've spotted 5 warning signs for Aspira Women's Health you should be aware of, and 1 of them shouldn't be ignored.

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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