Does Aldeyra Therapeutics (NASDAQ:ALDX) Have A Healthy Balance Sheet?

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 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, Aldeyra Therapeutics, Inc. (NASDAQ:ALDX) does carry debt. But is this debt a concern to shareholders?

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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. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Aldeyra Therapeutics Carry?

The chart below, which you can click on for greater detail, shows that Aldeyra Therapeutics had US$15.2m in debt in September 2025; about the same as the year before. But it also has US$75.3m in cash to offset that, meaning it has US$60.1m net cash.

How Strong Is Aldeyra Therapeutics' Balance Sheet?

According to the last reported balance sheet, Aldeyra Therapeutics had liabilities of US$28.5m due within 12 months, and liabilities of US$72.5k due beyond 12 months. Offsetting this, it had US$75.3m in cash and US$755.5k in receivables that were due within 12 months. So it actually has US$47.5m more liquid assets than total liabilities.

This excess liquidity suggests that Aldeyra Therapeutics is taking a careful approach to debt. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, Aldeyra Therapeutics 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 ultimately the future profitability of the business will decide if Aldeyra Therapeutics 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.

Check out our latest analysis for Aldeyra Therapeutics

Given its lack of meaningful operating revenue, Aldeyra Therapeutics shareholders no doubt hope it can fund itself until it has a profitable product.

So How Risky Is Aldeyra Therapeutics?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that Aldeyra Therapeutics had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through US$40m of cash and made a loss of US$43m. But at least it has US$60.1m 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. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 1 warning sign for Aldeyra Therapeutics that you should be aware of before investing here.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.