BioLife Solutions (NASDAQ:BLFS) Has Debt But No Earnings; Should You Worry?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, '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, BioLife Solutions, Inc. (NASDAQ:BLFS) does carry debt. But should shareholders be worried about its use of debt?

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. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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.

View our latest analysis for BioLife Solutions

How Much Debt Does BioLife Solutions Carry?

The chart below, which you can click on for greater detail, shows that BioLife Solutions had US$24.3m in debt in March 2024; about the same as the year before. However, its balance sheet shows it holds US$45.3m in cash, so it actually has US$21.0m net cash.

A Look At BioLife Solutions' Liabilities

Zooming in on the latest balance sheet data, we can see that BioLife Solutions had liabilities of US$38.7m due within 12 months and liabilities of US$29.5m due beyond that. Offsetting this, it had US$45.3m in cash and US$18.6m in receivables that were due within 12 months. So its liabilities total US$4.35m more than the combination of its cash and short-term receivables.

Having regard to BioLife Solutions' size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the US$919.5m company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, BioLife Solutions also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if BioLife Solutions 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, BioLife Solutions made a loss at the EBIT level, and saw its revenue drop to US$137m, which is a fall of 16%. That's not what we would hope to see.

So How Risky Is BioLife Solutions?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months BioLife Solutions lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$22m and booked a US$63m accounting loss. But at least it has US$21.0m on the balance sheet to spend on growth, near-term. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - BioLife Solutions has 1 warning sign we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com