Is ClearPoint Neuro (NASDAQ:CLPT) Weighed On By Its Debt Load?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that ClearPoint Neuro, Inc. (NASDAQ:CLPT) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

See our latest analysis for ClearPoint Neuro

What Is ClearPoint Neuro's Net Debt?

As you can see below, ClearPoint Neuro had US$9.98m of debt, at June 2024, 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$32.8m in cash, so it actually has US$22.9m net cash.

How Strong Is ClearPoint Neuro's Balance Sheet?

We can see from the most recent balance sheet that ClearPoint Neuro had liabilities of US$16.7m falling due within a year, and liabilities of US$3.75m due beyond that. Offsetting this, it had US$32.8m in cash and US$4.53m in receivables that were due within 12 months. So it actually has US$16.9m 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. Succinctly put, ClearPoint Neuro boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if ClearPoint Neuro can strengthen its balance sheet over time. 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, ClearPoint Neuro reported revenue of US$28m, which is a gain of 29%, 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 ClearPoint Neuro?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that ClearPoint Neuro had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of US$9.9m and booked a US$18m accounting loss. But the saving grace is the US$22.9m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. With very solid revenue growth in the last year, ClearPoint Neuro may be on a path to profitability. 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. To that end, you should be aware of the 3 warning signs we've spotted with ClearPoint Neuro .

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.