Does Dyadic International (NASDAQ:DYAI) Have A Healthy Balance Sheet?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. Importantly, Dyadic International, Inc. (NASDAQ:DYAI) does carry debt. But the more important question is: how much risk is that debt creating?

When Is Debt Dangerous?

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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for Dyadic International

What Is Dyadic International's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2024 Dyadic International had US$5.83m of debt, an increase on none, over one year. However, it does have US$12.0m in cash offsetting this, leading to net cash of US$6.21m.

A Look At Dyadic International's Liabilities

Zooming in on the latest balance sheet data, we can see that Dyadic International had liabilities of US$2.26m due within 12 months and liabilities of US$5.90m due beyond that. On the other hand, it had cash of US$12.0m and US$261.4k worth of receivables due within a year. So it can boast US$4.13m more liquid assets than total liabilities.

This short term liquidity is a sign that Dyadic International could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Dyadic International 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 Dyadic International's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Over 12 months, Dyadic International made a loss at the EBIT level, and saw its revenue drop to US$2.3m, which is a fall of 31%. To be frank that doesn't bode well.

So How Risky Is Dyadic International?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months Dyadic International lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$5.7m and booked a US$7.8m accounting loss. However, it has net cash of US$6.21m, 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. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 5 warning signs for Dyadic International (1 is concerning) you should be aware of.

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.

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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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