Is Health Catalyst (NASDAQ:HCAT) Weighed On By Its Debt Load?

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 might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that Health Catalyst, Inc. (NASDAQ:HCAT) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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. 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 examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for Health Catalyst

How Much Debt Does Health Catalyst Carry?

As you can see below, Health Catalyst had US$227.3m of debt, at June 2023, 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$343.8m in cash, so it actually has US$116.6m net cash.

A Look At Health Catalyst's Liabilities

The latest balance sheet data shows that Health Catalyst had liabilities of US$86.8m due within a year, and liabilities of US$246.3m falling due after that. Offsetting this, it had US$343.8m in cash and US$53.2m in receivables that were due within 12 months. So it can boast US$64.0m more liquid assets than total liabilities.

This surplus suggests that Health Catalyst has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Health Catalyst 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 Health Catalyst'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.

Over 12 months, Health Catalyst reported revenue of US$285m, which is a gain of 7.3%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Health Catalyst?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that Health Catalyst 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$61m and booked a US$147m accounting loss. But the saving grace is the US$116.6m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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. For example, we've discovered 2 warning signs for Health Catalyst that you should be aware of before investing here.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.