Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. We can see that BioNTech SE (NASDAQ:BNTX) does use debt in its business. But the real question is whether this debt is making the company risky.
When Is Debt A Problem?
Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
What Is BioNTech's Net Debt?
You can click the graphic below for the historical numbers, but it shows that as of September 2020 BioNTech had €101.2m of debt, an increase on €13.6m, over one year. However, its balance sheet shows it holds €1.01b in cash, so it actually has €907.1m net cash.
A Look At BioNTech's Liabilities
We can see from the most recent balance sheet that BioNTech had liabilities of €268.5m falling due within a year, and liabilities of €253.1m due beyond that. Offsetting these obligations, it had cash of €1.01b as well as receivables valued at €7.89m due within 12 months. So it actually has €494.6m more liquid assets than total liabilities.
This state of affairs indicates that BioNTech's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the €25.4b company is short on cash, but still worth keeping an eye on the balance sheet. Simply put, the fact that BioNTech has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine BioNTech'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.
In the last year BioNTech wasn't profitable at an EBIT level, but managed to grow its revenue by 15%, to €165m. We usually like to see faster growth from unprofitable companies, but each to their own.
So How Risky Is BioNTech?
We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year BioNTech had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of €382m and booked a €410m accounting loss. But at least it has €907.1m on the balance sheet to spend on growth, near-term. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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. Be aware that BioNTech is showing 2 warning signs in our investment analysis , you should know about...
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.
When trading BioNTech or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.