Health Check: How Prudently Does Kura Oncology (NASDAQ:KURA) Use Debt?

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. As with many other companies Kura Oncology, Inc. (NASDAQ:KURA) makes use of debt. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Kura Oncology Carry?

The chart below, which you can click on for greater detail, shows that Kura Oncology had US$9.57m in debt in March 2025; about the same as the year before. However, it does have US$658.2m in cash offsetting this, leading to net cash of US$648.6m.

How Healthy Is Kura Oncology's Balance Sheet?

We can see from the most recent balance sheet that Kura Oncology had liabilities of US$89.8m falling due within a year, and liabilities of US$289.6m due beyond that. Offsetting these obligations, it had cash of US$658.2m as well as receivables valued at US$54.0m due within 12 months. So it actually has US$332.9m more liquid assets than total liabilities.

This luscious liquidity implies that Kura Oncology's balance sheet is sturdy like a giant sequoia tree. On this view, lenders should feel as safe as the beloved of a black-belt karate master. Succinctly put, Kura Oncology boasts net cash, 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 ultimately the future profitability of the business will decide if Kura Oncology 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.

Check out our latest analysis for Kura Oncology

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

So How Risky Is Kura Oncology?

While Kura Oncology lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$111m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. There's no doubt the next few years will be crucial to how the business matures. 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. To that end, you should be aware of the 1 warning sign we've spotted with Kura Oncology .

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.