Is BioLife Solutions (NASDAQ:BLFS) Weighed On By Its Debt Load?

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. As with many other companies BioLife Solutions, Inc. (NASDAQ:BLFS) makes use of debt. But should shareholders be worried about its use of debt?

When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

See our latest analysis for BioLife Solutions

What Is BioLife Solutions's Net Debt?

As you can see below, BioLife Solutions had US$20.1m of debt at September 2024, down from US$26.0m a year prior. However, it does have US$34.2m in cash offsetting this, leading to net cash of US$14.1m.

How Strong Is BioLife Solutions' Balance Sheet?

The latest balance sheet data shows that BioLife Solutions had liabilities of US$32.2m due within a year, and liabilities of US$24.0m falling due after that. Offsetting these obligations, it had cash of US$34.2m as well as receivables valued at US$17.9m due within 12 months. So it has liabilities totalling US$4.09m more than its cash and near-term receivables, combined.

This state of affairs indicates that BioLife Solutions' balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the US$1.27b company is short on cash, but still worth keeping an eye on the 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. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine BioLife Solutions's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Over 12 months, BioLife Solutions reported revenue of US$147m, which is a gain of 16%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is BioLife Solutions?

While BioLife Solutions lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$2.2m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. With revenue growth uninspiring, we'd really need to see some positive EBIT before mustering much enthusiasm for this business. When I consider a company to be a bit risky, I think it is responsible to check out whether insiders have been reporting any share sales. Luckily, you can click here ito see our graphic depicting BioLife Solutions insider transactions.

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.

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

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.