LifeStance Health Group (NASDAQ:LFST) Is Carrying A Fair Bit Of Debt

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.' 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. Importantly, LifeStance Health Group, Inc. (NASDAQ:LFST) does carry debt. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is LifeStance Health Group's Net Debt?

As you can see below, LifeStance Health Group had US$287.0m of debt, at December 2024, which is about the same as the year before. You can click the chart for greater detail. On the flip side, it has US$154.6m in cash leading to net debt of about US$132.5m.

A Look At LifeStance Health Group's Liabilities

According to the last reported balance sheet, LifeStance Health Group had liabilities of US$228.9m due within 12 months, and liabilities of US$443.1m due beyond 12 months. On the other hand, it had cash of US$154.6m and US$132.0m worth of receivables due within a year. So it has liabilities totalling US$385.4m more than its cash and near-term receivables, combined.

Of course, LifeStance Health Group has a market capitalization of US$2.62b, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. 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 LifeStance Health Group'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 LifeStance Health Group

In the last year LifeStance Health Group wasn't profitable at an EBIT level, but managed to grow its revenue by 19%, to US$1.3b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months LifeStance Health Group produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at US$29m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. We would feel better if it turned its trailing twelve month loss of US$57m into a profit. So to be blunt we do think it is risky. 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. For instance, we've identified 1 warning sign for LifeStance Health Group that 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.

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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.