Does Outset Medical (NASDAQ:OM) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. As with many other companies Outset Medical, Inc. (NASDAQ:OM) makes use of debt. But should shareholders be worried about its use of debt?

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Outset Medical's Debt?

The image below, which you can click on for greater detail, shows that Outset Medical had debt of US$94.1m at the end of March 2025, a reduction from US$196.8m over a year. However, it does have US$189.0m in cash offsetting this, leading to net cash of US$94.9m.

How Healthy Is Outset Medical's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Outset Medical had liabilities of US$34.2m due within 12 months and liabilities of US$97.1m due beyond that. Offsetting these obligations, it had cash of US$189.0m as well as receivables valued at US$36.9m due within 12 months. So it can boast US$94.5m more liquid assets than total liabilities.

This excess liquidity is a great indication that Outset Medical's 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, Outset Medical 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 it is future earnings, more than anything, that will determine Outset Medical'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 Outset Medical

In the last year Outset Medical had a loss before interest and tax, and actually shrunk its revenue by 7.8%, to US$115m. We would much prefer see growth.

So How Risky Is Outset Medical?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that Outset Medical had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through US$97m of cash and made a loss of US$114m. But at least it has US$94.9m on the balance sheet to spend on growth, near-term. 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. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 3 warning signs for Outset Medical (2 make us uncomfortable!) that you should be aware of before investing here.

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.