Health Check: How Prudently Does Performant Healthcare (NASDAQ:PHLT) Use Debt?

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 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. Importantly, Performant Healthcare, Inc. (NASDAQ:PHLT) does carry debt. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Performant Healthcare's Net Debt?

The image below, which you can click on for greater detail, shows that at March 2025 Performant Healthcare had debt of US$8.00m, up from US$5.00m in one year. But it also has US$9.98m in cash to offset that, meaning it has US$1.98m net cash.

How Healthy Is Performant Healthcare's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Performant Healthcare had liabilities of US$16.4m due within 12 months and liabilities of US$10.8m due beyond that. Offsetting these obligations, it had cash of US$9.98m as well as receivables valued at US$27.8m due within 12 months. So it actually has US$10.5m more liquid assets than total liabilities.

This short term liquidity is a sign that Performant Healthcare could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Performant Healthcare boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Performant Healthcare'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.

Check out our latest analysis for Performant Healthcare

Over 12 months, Performant Healthcare reported revenue of US$129m, which is a gain of 12%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is Performant Healthcare?

Although Performant Healthcare had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of US$4.2m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - Performant Healthcare has 1 warning sign we think you should be aware of.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.