Is Humacyte (NASDAQ:HUMA) A Risky Investment?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says '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, Humacyte, Inc. (NASDAQ:HUMA) does carry debt. But should shareholders be worried about its use of debt?

We've discovered 4 warning signs about Humacyte. View them for free.

When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. 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, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Humacyte Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Humacyte had US$66.7m of debt, an increase on US$58.0m, over one year. However, it also had US$62.8m in cash, and so its net debt is US$3.82m.

How Healthy Is Humacyte's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Humacyte had liabilities of US$20.0m due within 12 months and liabilities of US$106.5m due beyond that. On the other hand, it had cash of US$62.8m and US$488.0k worth of receivables due within a year. So its liabilities total US$63.2m more than the combination of its cash and short-term receivables.

Of course, Humacyte has a market capitalization of US$345.9m, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Carrying virtually no net debt, Humacyte has a very light debt load indeed. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Humacyte can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Check out our latest analysis for Humacyte

While it hasn't made a profit, at least Humacyte booked its first revenue as a publicly listed company, in the last twelve months.

Caveat Emptor

Importantly, Humacyte had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping US$111m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled US$101m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 4 warning signs for Humacyte (3 are concerning!) that you should be aware of before investing here.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.