Is Aspen Aerogels (NYSE:ASPN) A Risky Investment?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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. We can see that Aspen Aerogels, Inc. (NYSE:ASPN) does use debt in its business. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Aspen Aerogels's Net Debt?

The image below, which you can click on for greater detail, shows that at March 2025 Aspen Aerogels had debt of US$137.9m, up from US$118.0m in one year. However, it does have US$192.0m in cash offsetting this, leading to net cash of US$54.2m.

How Healthy Is Aspen Aerogels' Balance Sheet?

The latest balance sheet data shows that Aspen Aerogels had liabilities of US$81.4m due within a year, and liabilities of US$158.7m falling due after that. Offsetting this, it had US$192.0m in cash and US$77.4m in receivables that were due within 12 months. So it can boast US$29.3m more liquid assets than total liabilities.

This surplus suggests that Aspen Aerogels has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Aspen Aerogels has more cash than debt is arguably a good indication that it can manage its debt safely. 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 Aspen Aerogels'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.

Check out our latest analysis for Aspen Aerogels

Over 12 months, Aspen Aerogels reported revenue of US$437m, which is a gain of 52%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is Aspen Aerogels?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that Aspen Aerogels had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through US$4.5m of cash and made a loss of US$286m. But the saving grace is the US$54.2m on the balance sheet. That means it could keep spending at its current rate for more than two years. With very solid revenue growth in the last year, Aspen Aerogels may be on a path to profitability. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. 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 instance, we've identified 1 warning sign for Aspen Aerogels 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.