Does Cue Biopharma (NASDAQ:CUE) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. Importantly, Cue Biopharma, Inc. (NASDAQ:CUE) does carry debt. But the more important question is: how much risk is that debt creating?

What Risk Does Debt Bring?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, 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. When we think about a company's use of debt, we first look at cash and debt together.

See our latest analysis for Cue Biopharma

What Is Cue Biopharma's Debt?

You can click the graphic below for the historical numbers, but it shows that Cue Biopharma had US$9.12m of debt in September 2023, down from US$9.96m, one year before. But it also has US$54.7m in cash to offset that, meaning it has US$45.6m net cash.

A Look At Cue Biopharma's Liabilities

The latest balance sheet data shows that Cue Biopharma had liabilities of US$17.2m due within a year, and liabilities of US$9.02m falling due after that. On the other hand, it had cash of US$54.7m and US$1.66m worth of receivables due within a year. So it can boast US$30.1m more liquid assets than total liabilities.

This excess liquidity suggests that Cue Biopharma is taking a careful approach to debt. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Simply put, the fact that Cue Biopharma has more cash than debt is arguably a good indication that 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 Cue Biopharma'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, Cue Biopharma made a loss at the EBIT level, and saw its revenue drop to US$3.8m, which is a fall of 59%. To be frank that doesn't bode well.

So How Risky Is Cue Biopharma?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Cue Biopharma had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of US$40m and booked a US$52m accounting loss. However, it has net cash of US$45.6m, so it has a bit of time before it will need more capital. 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. Case in point: We've spotted 4 warning signs for Cue Biopharma 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.