Is Fulgent Genetics (NASDAQ:FLGT) Using Too Much Debt?

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. Importantly, Fulgent Genetics, Inc. (NASDAQ:FLGT) does carry debt. But should shareholders be worried about its use of debt?

We've discovered 1 warning sign about Fulgent Genetics. View them for free.

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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.

What Is Fulgent Genetics's Debt?

As you can see below, Fulgent Genetics had US$2.43m of debt at March 2025, down from US$2.91m a year prior. But it also has US$320.3m in cash to offset that, meaning it has US$317.9m net cash.

A Look At Fulgent Genetics' Liabilities

The latest balance sheet data shows that Fulgent Genetics had liabilities of US$65.9m due within a year, and liabilities of US$17.1m falling due after that. Offsetting these obligations, it had cash of US$320.3m as well as receivables valued at US$80.4m due within 12 months. So it actually has US$317.8m more liquid assets than total liabilities.

This excess liquidity is a great indication that Fulgent Genetics' balance sheet is almost as strong as Fort Knox. Having regard to this fact, we think its balance sheet is as strong as an ox. Succinctly put, Fulgent Genetics 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 Fulgent Genetics'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.

View our latest analysis for Fulgent Genetics

In the last year Fulgent Genetics's revenue was pretty flat, and it made a negative EBIT. While that hardly impresses, its not too bad either.

So How Risky Is Fulgent Genetics?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that Fulgent Genetics had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through US$32m of cash and made a loss of US$41m. While this does make the company a bit risky, it's important to remember it has net cash of US$317.9m. That kitty means the company can keep spending for growth for at least two years, at current rates. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 1 warning sign for Fulgent Genetics you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.