Is Dynavax Technologies (NASDAQ:DVAX) Weighed On By Its Debt Load?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies Dynavax Technologies Corporation (NASDAQ:DVAX) makes use of debt. But the real question is whether this debt is making the company risky.

Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

See our latest analysis for Dynavax Technologies

How Much Debt Does Dynavax Technologies Carry?

As you can see below, Dynavax Technologies had US$223.0m of debt, at March 2024, which is about the same as the year before. You can click the chart for greater detail. But it also has US$723.5m in cash to offset that, meaning it has US$500.6m net cash.

How Strong Is Dynavax Technologies' Balance Sheet?

The latest balance sheet data shows that Dynavax Technologies had liabilities of US$56.0m due within a year, and liabilities of US$312.1m falling due after that. On the other hand, it had cash of US$723.5m and US$48.3m worth of receivables due within a year. So it can boast US$403.8m more liquid assets than total liabilities.

This surplus suggests that Dynavax Technologies is using debt in a way that is appears to be both safe and conservative. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, Dynavax Technologies boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Dynavax Technologies'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, Dynavax Technologies made a loss at the EBIT level, and saw its revenue drop to US$236m, which is a fall of 64%. To be frank that doesn't bode well.

So How Risky Is Dynavax Technologies?

While Dynavax Technologies lost money on an earnings before interest and tax (EBIT) level, it actually booked a paper profit of US$9.2m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. 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 instance, we've identified 1 warning sign for Dynavax Technologies that 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.

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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.

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