Lantheus Holdings (NASDAQ:LNTH) Seems To Use Debt Rather Sparingly

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. As with many other companies Lantheus Holdings, Inc. (NASDAQ:LNTH) makes use of debt. But the more important question is: how much risk is that debt creating?

When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

View our latest analysis for Lantheus Holdings

How Much Debt Does Lantheus Holdings Carry?

The chart below, which you can click on for greater detail, shows that Lantheus Holdings had US$563.7m in debt in September 2024; about the same as the year before. But on the other hand it also has US$866.4m in cash, leading to a US$302.7m net cash position.

How Strong Is Lantheus Holdings' Balance Sheet?

According to the last reported balance sheet, Lantheus Holdings had liabilities of US$784.1m due within 12 months, and liabilities of US$85.8m due beyond 12 months. Offsetting this, it had US$866.4m in cash and US$329.3m in receivables that were due within 12 months. So it actually has US$325.8m more liquid assets than total liabilities.

This short term liquidity is a sign that Lantheus Holdings could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Lantheus Holdings has more cash than debt is arguably a good indication that it can manage its debt safely.

Even more impressive was the fact that Lantheus Holdings grew its EBIT by 164% over twelve months. That boost will make it even easier to pay down debt going forward. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Lantheus Holdings can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Lantheus Holdings has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. During the last three years, Lantheus Holdings produced sturdy free cash flow equating to 59% of its EBIT, about what we'd expect. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Lantheus Holdings has net cash of US$302.7m, as well as more liquid assets than liabilities. And it impressed us with its EBIT growth of 164% over the last year. So we don't think Lantheus Holdings's use of debt is risky. Over time, share prices tend to follow earnings per share, so if you're interested in Lantheus Holdings, you may well want to click here to check an interactive graph of its earnings per share history.

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.