EDAP TMS (NASDAQ:EDAP) Has Debt But No Earnings; Should You Worry?

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.' 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 can see that EDAP TMS S.A. (NASDAQ:EDAP) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt A Problem?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does EDAP TMS Carry?

As you can see below, at the end of September 2025, EDAP TMS had €9.20m of debt, up from €6.47m a year ago. Click the image for more detail. But on the other hand it also has €10.6m in cash, leading to a €1.37m net cash position.

How Strong Is EDAP TMS' Balance Sheet?

We can see from the most recent balance sheet that EDAP TMS had liabilities of €31.4m falling due within a year, and liabilities of €6.74m due beyond that. Offsetting these obligations, it had cash of €10.6m as well as receivables valued at €19.0m due within 12 months. So it has liabilities totalling €8.55m more than its cash and near-term receivables, combined.

Of course, EDAP TMS has a market capitalization of €74.8m, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, EDAP TMS boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine EDAP TMS'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.

See our latest analysis for EDAP TMS

Over 12 months, EDAP TMS saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that's not too bad, we'd prefer see growth.

So How Risky Is EDAP TMS?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that EDAP TMS 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 €16m and booked a €20m accounting loss. Given it only has net cash of €1.37m, the company may need to raise more capital if it doesn't reach break-even soon. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that EDAP TMS is showing 4 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

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.