Does ClearPoint Neuro (NASDAQ:CLPT) Have A Healthy Balance Sheet?

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 ClearPoint Neuro, Inc. (NASDAQ:CLPT) makes use of debt. But the real question is whether this debt is making the company risky.

What Risk Does Debt Bring?

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. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for ClearPoint Neuro

What Is ClearPoint Neuro's Debt?

The image below, which you can click on for greater detail, shows that ClearPoint Neuro had debt of US$9.88m at the end of September 2022, a reduction from US$17.6m over a year. But on the other hand it also has US$40.5m in cash, leading to a US$30.6m net cash position.

How Strong Is ClearPoint Neuro's Balance Sheet?

The latest balance sheet data shows that ClearPoint Neuro had liabilities of US$6.10m due within a year, and liabilities of US$11.8m falling due after that. On the other hand, it had cash of US$40.5m and US$3.41m worth of receivables due within a year. So it can boast US$26.0m more liquid assets than total liabilities.

This surplus suggests that ClearPoint Neuro has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that ClearPoint Neuro 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 ClearPoint Neuro's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year ClearPoint Neuro wasn't profitable at an EBIT level, but managed to grow its revenue by 25%, to US$20m. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is ClearPoint Neuro?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months ClearPoint Neuro lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$18m of cash and made a loss of US$16m. While this does make the company a bit risky, it's important to remember it has net cash of US$30.6m. That means it could keep spending at its current rate for more than two years. With very solid revenue growth in the last year, ClearPoint Neuro may be on a path to profitability. Pre-profit companies are often risky, but they can also offer great rewards. 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. For example - ClearPoint Neuro has 2 warning signs we think 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.

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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.