Amicus Therapeutics (NASDAQ:FOLD) Is Carrying A Fair Bit Of 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.' 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, Amicus Therapeutics, Inc. (NASDAQ:FOLD) does carry debt. But is this debt a concern to shareholders?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for Amicus Therapeutics

What Is Amicus Therapeutics's Net Debt?

As you can see below, Amicus Therapeutics had US$390.7m of debt, at June 2022, which is about the same as the year before. You can click the chart for greater detail. However, it also had US$386.8m in cash, and so its net debt is US$3.81m.

A Look At Amicus Therapeutics' Liabilities

The latest balance sheet data shows that Amicus Therapeutics had liabilities of US$164.6m due within a year, and liabilities of US$462.5m falling due after that. On the other hand, it had cash of US$386.8m and US$52.6m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$187.8m.

Given Amicus Therapeutics has a market capitalization of US$3.58b, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. But either way, Amicus Therapeutics has virtually no net debt, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Amicus Therapeutics'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 Amicus Therapeutics wasn't profitable at an EBIT level, but managed to grow its revenue by 14%, to US$321m. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Importantly, Amicus Therapeutics had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost US$220m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through US$172m of cash over the last year. So to be blunt we think it is risky. 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. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Amicus Therapeutics you should know about.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.