Is Akoya Biosciences (NASDAQ:AKYA) Using Too Much Debt?

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. Importantly, Akoya Biosciences, Inc. (NASDAQ:AKYA) does carry debt. But the real question is whether this debt is making the company risky.

When Is Debt Dangerous?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for Akoya Biosciences

What Is Akoya Biosciences's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2024 Akoya Biosciences had debt of US$75.7m, up from US$63.6m in one year. However, because it has a cash reserve of US$45.2m, its net debt is less, at about US$30.5m.

A Look At Akoya Biosciences' Liabilities

According to the last reported balance sheet, Akoya Biosciences had liabilities of US$32.7m due within 12 months, and liabilities of US$88.8m due beyond 12 months. Offsetting this, it had US$45.2m in cash and US$16.6m in receivables that were due within 12 months. So its liabilities total US$59.7m more than the combination of its cash and short-term receivables.

This deficit isn't so bad because Akoya Biosciences is worth US$156.9m, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Akoya Biosciences 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.

In the last year Akoya Biosciences wasn't profitable at an EBIT level, but managed to grow its revenue by 9.7%, to US$93m. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Importantly, Akoya Biosciences had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable US$48m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled US$54m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. 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. We've identified 3 warning signs with Akoya Biosciences , and understanding them should be part of your investment process.

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.