Here's Why INmune Bio (NASDAQ:INMB) Can Manage Its Debt Despite Losing Money

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that INmune Bio, Inc. (NASDAQ:INMB) does use debt in its business. But the real question is whether this debt is making the company risky.

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. If things get really bad, the lenders can take control of the business. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for INmune Bio

How Much Debt Does INmune Bio Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2022 INmune Bio had US$14.5m of debt, an increase on none, over one year. But it also has US$66.7m in cash to offset that, meaning it has US$52.2m net cash.

A Look At INmune Bio's Liabilities

Zooming in on the latest balance sheet data, we can see that INmune Bio had liabilities of US$3.23m due within 12 months and liabilities of US$15.5m due beyond that. Offsetting these obligations, it had cash of US$66.7m as well as receivables valued at US$5.65m due within 12 months. So it actually has US$53.7m more liquid assets than total liabilities.

This surplus suggests that INmune Bio is using debt in a way that is appears to be both safe and conservative. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Simply put, the fact that INmune Bio has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if INmune Bio can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Given its lack of meaningful operating revenue, INmune Bio shareholders no doubt hope it can fund itself until it has a profitable product.

So How Risky Is INmune Bio?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months INmune Bio lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$32m of cash and made a loss of US$33m. However, it has net cash of US$52.2m, so it has a bit of time before it will need more capital. The good news for shareholders is that INmune Bio has dazzling revenue growth, so there's a very good chance it can boost its free cash flow in the years to come. While unprofitable companies can be risky, they can also grow hard and fast in those pre-profit years. 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 instance, we've identified 6 warning signs for INmune Bio (3 make us uncomfortable) you should be aware of.

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.