Is Autolus Therapeutics (NASDAQ:AUTL) A Risky Investment?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. Importantly, Autolus Therapeutics plc (NASDAQ:AUTL) does carry debt. But is this debt a concern to shareholders?

What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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, 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for Autolus Therapeutics

What Is Autolus Therapeutics's Debt?

The image below, which you can click on for greater detail, shows that at September 2024 Autolus Therapeutics had debt of US$248.9m, up from US$140.8m in one year. But it also has US$657.1m in cash to offset that, meaning it has US$408.1m net cash.

A Look At Autolus Therapeutics' Liabilities

The latest balance sheet data shows that Autolus Therapeutics had liabilities of US$52.5m due within a year, and liabilities of US$298.1m falling due after that. Offsetting these obligations, it had cash of US$657.1m as well as receivables valued at US$43.3m due within 12 months. So it actually has US$349.8m more liquid assets than total liabilities.

This surplus liquidity suggests that Autolus Therapeutics' balance sheet could take a hit just as well as Homer Simpson's head can take a punch. Having regard to this fact, we think its balance sheet is as strong as an ox. Succinctly put, Autolus Therapeutics boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Autolus Therapeutics 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.

Over 12 months, Autolus Therapeutics reported revenue of US$10m, which is a gain of 83%, 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 Autolus Therapeutics?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that Autolus Therapeutics had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of US$206m and booked a US$270m accounting loss. But the saving grace is the US$408.1m 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, Autolus Therapeutics 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. To that end, you should learn about the 3 warning signs we've spotted with Autolus Therapeutics (including 1 which is concerning) .

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.