Is MiMedx Group (NASDAQ:MDXG) A Risky Investment?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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, MiMedx Group, Inc. (NASDAQ:MDXG) does carry debt. But is this debt a concern to shareholders?

When Is Debt A Problem?

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. 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 step when considering a company's debt levels is to consider its cash and debt together.

Check out our latest analysis for MiMedx Group

What Is MiMedx Group's Debt?

As you can see below, MiMedx Group had US$48.0m of debt, at September 2021, which is about the same as the year before. You can click the chart for greater detail. However, it does have US$90.6m in cash offsetting this, leading to net cash of US$42.6m.

How Healthy Is MiMedx Group's Balance Sheet?

The latest balance sheet data shows that MiMedx Group had liabilities of US$41.7m due within a year, and liabilities of US$52.1m falling due after that. Offsetting this, it had US$90.6m in cash and US$37.2m in receivables that were due within 12 months. So it can boast US$33.9m more liquid assets than total liabilities.

This surplus suggests that MiMedx Group has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, MiMedx Group 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 it is future earnings, more than anything, that will determine MiMedx Group'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.

In the last year MiMedx Group's revenue was pretty flat, and it made a negative EBIT. While that hardly impresses, its not too bad either.

So How Risky Is MiMedx Group?

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 MiMedx Group lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$14m of cash and made a loss of US$35m. With only US$42.6m on the balance sheet, it would appear that its going to need to raise capital again soon. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For example - MiMedx Group has 2 warning signs we think you should be aware of.

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.

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.

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