Is Alpine Immune Sciences (NASDAQ:ALPN) A Risky Investment?

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. We note that Alpine Immune Sciences, Inc. (NASDAQ:ALPN) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

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. 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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for Alpine Immune Sciences

What Is Alpine Immune Sciences's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Alpine Immune Sciences had US$8.00m of debt in December 2021, down from US$10.1m, one year before. However, its balance sheet shows it holds US$162.3m in cash, so it actually has US$154.3m net cash.

How Healthy Is Alpine Immune Sciences' Balance Sheet?

We can see from the most recent balance sheet that Alpine Immune Sciences had liabilities of US$69.8m falling due within a year, and liabilities of US$65.2m due beyond that. Offsetting these obligations, it had cash of US$162.3m as well as receivables valued at US$25.3m due within 12 months. So it actually has US$52.6m more liquid assets than total liabilities.

It's good to see that Alpine Immune Sciences has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, Alpine Immune Sciences 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 Alpine Immune Sciences 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.

Over 12 months, Alpine Immune Sciences reported revenue of US$23m, which is a gain of 151%, although it did not report any earnings before interest and tax. So there's no doubt that shareholders are cheering for growth

So How Risky Is Alpine Immune Sciences?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And in the last year Alpine Immune Sciences had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of US$15m and booked a US$50m accounting loss. However, it has net cash of US$154.3m, so it has a bit of time before it will need more capital. Importantly, Alpine Immune Sciences's revenue growth is hot to trot. While unprofitable companies can be risky, they can also grow hard and fast in those pre-profit years. 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. For example, we've discovered 4 warning signs for Alpine Immune Sciences (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.