Rock star Growth Puts Alpine Immune Sciences (NASDAQ:ALPN) In A Position To Use Debt

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 is this debt a concern to shareholders?

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. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

Check out our latest analysis for Alpine Immune Sciences

What Is Alpine Immune Sciences's Debt?

The chart below, which you can click on for greater detail, shows that Alpine Immune Sciences had US$10.3m in debt in June 2021; about the same as the year before. However, it does have US$91.1m in cash offsetting this, leading to net cash of US$80.8m.

A Look At Alpine Immune Sciences' Liabilities

The latest balance sheet data shows that Alpine Immune Sciences had liabilities of US$60.2m due within a year, and liabilities of US$55.7m falling due after that. On the other hand, it had cash of US$91.1m and US$45.3m worth of receivables due within a year. So it can boast US$20.4m more liquid assets than total liabilities.

This surplus suggests that Alpine Immune Sciences has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Alpine Immune Sciences has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. 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.

In the last year Alpine Immune Sciences wasn't profitable at an EBIT level, but managed to grow its revenue by 508%, to US$18m. When it comes to revenue growth, that's like nailing the game winning 3-pointer!

So How Risky Is Alpine Immune Sciences?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months Alpine Immune Sciences lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$46m and booked a US$34m accounting loss. However, it has net cash of US$80.8m, 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. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 2 warning signs for Alpine Immune Sciences (1 is a bit unpleasant!) that you should be aware of before investing here.

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.
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