Is Ekso Bionics Holdings (NASDAQ:EKSO) A Risky Investment?

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, Ekso Bionics Holdings, Inc. (NASDAQ:EKSO) does carry debt. But the real question is whether this debt is making the company risky.

What Risk Does Debt Bring?

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. 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 Ekso Bionics Holdings

What Is Ekso Bionics Holdings's Net Debt?

As you can see below, Ekso Bionics Holdings had US$1.99m of debt at March 2022, down from US$3.08m a year prior. But on the other hand it also has US$36.2m in cash, leading to a US$34.2m net cash position.

How Strong Is Ekso Bionics Holdings' Balance Sheet?

We can see from the most recent balance sheet that Ekso Bionics Holdings had liabilities of US$5.97m falling due within a year, and liabilities of US$4.79m due beyond that. On the other hand, it had cash of US$36.2m and US$3.35m worth of receivables due within a year. So it can boast US$28.8m more liquid assets than total liabilities.

This excess liquidity is a great indication that Ekso Bionics Holdings' balance sheet is almost as strong as Fort Knox. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Succinctly put, Ekso Bionics Holdings 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 it is future earnings, more than anything, that will determine Ekso Bionics Holdings'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.

Over 12 months, Ekso Bionics Holdings reported revenue of US$12m, which is a gain of 28%, 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 Ekso Bionics Holdings?

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 Ekso Bionics Holdings lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$13m of cash and made a loss of US$11m. Given it only has net cash of US$34.2m, the company may need to raise more capital if it doesn't reach break-even soon. Ekso Bionics Holdings's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. 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. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 4 warning signs for Ekso Bionics Holdings you should know about.

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.