Is Nano-X Imaging (NASDAQ:NNOX) Weighed On By Its Debt Load?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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. Importantly, Nano-X Imaging Ltd. (NASDAQ:NNOX) does carry debt. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Nano-X Imaging's Debt?

The image below, which you can click on for greater detail, shows that Nano-X Imaging had debt of US$3.06m at the end of December 2024, a reduction from US$3.49m over a year. But on the other hand it also has US$73.2m in cash, leading to a US$70.1m net cash position.

How Healthy Is Nano-X Imaging's Balance Sheet?

We can see from the most recent balance sheet that Nano-X Imaging had liabilities of US$14.0m falling due within a year, and liabilities of US$6.91m due beyond that. Offsetting these obligations, it had cash of US$73.2m as well as receivables valued at US$1.81m due within 12 months. So it can boast US$54.1m more liquid assets than total liabilities.

This surplus suggests that Nano-X Imaging is using debt in a way that is appears to be both safe and conservative. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, Nano-X Imaging 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 ultimately the future profitability of the business will decide if Nano-X Imaging can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

See our latest analysis for Nano-X Imaging

In the last year Nano-X Imaging wasn't profitable at an EBIT level, but managed to grow its revenue by 14%, to US$11m. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Nano-X Imaging?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Nano-X Imaging had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$39m of cash and made a loss of US$54m. However, it has net cash of US$70.1m, so it has a bit of time before it will need more capital. 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. 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. Be aware that Nano-X Imaging is showing 1 warning sign in our investment analysis , you should know about...

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.