Is Liquidia (NASDAQ:LQDA) Weighed On By Its Debt Load?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that Liquidia Corporation (NASDAQ:LQDA) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. 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. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Liquidia's Net Debt?

The image below, which you can click on for greater detail, shows that at March 2025 Liquidia had debt of US$140.8m, up from US$84.4m in one year. However, it does have US$169.8m in cash offsetting this, leading to net cash of US$29.0m.

How Healthy Is Liquidia's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Liquidia had liabilities of US$60.5m due within 12 months and liabilities of US$117.2m due beyond that. On the other hand, it had cash of US$169.8m and US$1.25m worth of receivables due within a year. So it has liabilities totalling US$6.71m more than its cash and near-term receivables, combined.

This state of affairs indicates that Liquidia's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the US$1.64b company is short on cash, but still worth keeping an eye on the balance sheet. While it does have liabilities worth noting, Liquidia 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 Liquidia's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

See our latest analysis for Liquidia

Over 12 months, Liquidia made a loss at the EBIT level, and saw its revenue drop to US$14m, which is a fall of 11%. That's not what we would hope to see.

So How Risky Is Liquidia?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Liquidia had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$107m of cash and made a loss of US$139m. However, it has net cash of US$29.0m, so it has a bit of time before it will need more capital. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. 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. Case in point: We've spotted 1 warning sign for Liquidia 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.