Is Inhibrx (NASDAQ:INBX) Using Debt Sensibly?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that Inhibrx, Inc. (NASDAQ:INBX) does use debt in its business. But should shareholders be worried about its use of debt?

Why Does Debt Bring Risk?

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 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, 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. 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 Inhibrx

What Is Inhibrx's Debt?

The chart below, which you can click on for greater detail, shows that Inhibrx had US$208.2m in debt in March 2024; about the same as the year before. However, it does have US$252.5m in cash offsetting this, leading to net cash of US$44.3m.

A Look At Inhibrx's Liabilities

The latest balance sheet data shows that Inhibrx had liabilities of US$71.9m due within a year, and liabilities of US$205.1m falling due after that. Offsetting these obligations, it had cash of US$252.5m as well as receivables valued at US$3.04m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$21.5m.

This state of affairs indicates that Inhibrx's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the US$1.80b company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, Inhibrx also has more cash than debt, so we're pretty confident 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 Inhibrx'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, Inhibrx reported revenue of US$1.8m, which is a gain of 39%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

So How Risky Is Inhibrx?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Inhibrx had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$222m of cash and made a loss of US$271m. However, it has net cash of US$44.3m, so it has a bit of time before it will need more capital. Inhibrx's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. Pre-profit companies are often risky, but they can also offer great rewards. 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. These risks can be hard to spot. Every company has them, and we've spotted 4 warning signs for Inhibrx (of which 1 makes us a bit uncomfortable!) you should know about.

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.