Is Corbus Pharmaceuticals Holdings (NASDAQ:CRBP) Using Too Much Debt?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) does carry debt. But the real question is whether this debt is making the company risky.

Why Does Debt Bring Risk?

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. If things get really bad, the lenders can take control of the business. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, plenty of companies use debt to fund growth, without any negative consequences. 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 Corbus Pharmaceuticals Holdings

What Is Corbus Pharmaceuticals Holdings's Net Debt?

As you can see below, Corbus Pharmaceuticals Holdings had US$18.6m of debt, at September 2021, which is about the same as the year before. You can click the chart for greater detail. But on the other hand it also has US$106.9m in cash, leading to a US$88.3m net cash position.

How Healthy Is Corbus Pharmaceuticals Holdings' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Corbus Pharmaceuticals Holdings had liabilities of US$17.1m due within 12 months and liabilities of US$24.8m due beyond that. On the other hand, it had cash of US$106.9m and US$2.50m worth of receivables due within a year. So it can boast US$67.4m more liquid assets than total liabilities.

This surplus liquidity suggests that Corbus Pharmaceuticals Holdings' 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, Corbus Pharmaceuticals Holdings boasts net cash, so it's fair to say it does not have a heavy debt load! 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 Corbus Pharmaceuticals Holdings'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 Corbus Pharmaceuticals Holdings had a loss before interest and tax, and actually shrunk its revenue by 74%, to US$1.5m. That makes us nervous, to say the least.

So How Risky Is Corbus Pharmaceuticals Holdings?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months Corbus Pharmaceuticals Holdings lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$57m of cash and made a loss of US$44m. With only US$88.3m on the balance sheet, it would appear that its going to need to raise capital again soon. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. 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. Case in point: We've spotted 4 warning signs for Corbus Pharmaceuticals Holdings you should be aware of.

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.

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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