Does Biodesix (NASDAQ:BDSX) Have A Healthy Balance Sheet?

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.' 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, Biodesix, Inc. (NASDAQ:BDSX) does carry debt. But should shareholders be worried about its use of debt?

When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, 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.

See our latest analysis for Biodesix

How Much Debt Does Biodesix Carry?

The image below, which you can click on for greater detail, shows that at June 2024 Biodesix had debt of US$35.8m, up from US$24.7m in one year. However, it does have US$42.2m in cash offsetting this, leading to net cash of US$6.38m.

A Look At Biodesix's Liabilities

According to the last reported balance sheet, Biodesix had liabilities of US$17.6m due within 12 months, and liabilities of US$62.0m due beyond 12 months. Offsetting this, it had US$42.2m in cash and US$10.1m in receivables that were due within 12 months. So it has liabilities totalling US$27.2m more than its cash and near-term receivables, combined.

Given Biodesix has a market capitalization of US$261.3m, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, Biodesix also has more cash than debt, so we're pretty confident it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Biodesix 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.

Over 12 months, Biodesix reported revenue of US$61m, which is a gain of 46%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is Biodesix?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Biodesix lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$61m and booked a US$45m accounting loss. Given it only has net cash of US$6.38m, the company may need to raise more capital if it doesn't reach break-even soon. Biodesix's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. 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. We've identified 3 warning signs with Biodesix (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

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.

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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.