MeiraGTx Holdings (NASDAQ:MGTX) Is Making Moderate Use Of Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 MeiraGTx Holdings plc (NASDAQ:MGTX) makes use of debt. But is this debt a concern to shareholders?

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is MeiraGTx Holdings's Net Debt?

As you can see below, MeiraGTx Holdings had US$73.8m of debt, at June 2025, which is about the same as the year before. You can click the chart for greater detail. On the flip side, it has US$32.2m in cash leading to net debt of about US$41.6m.

How Strong Is MeiraGTx Holdings' Balance Sheet?

The latest balance sheet data shows that MeiraGTx Holdings had liabilities of US$53.4m due within a year, and liabilities of US$142.3m falling due after that. On the other hand, it had cash of US$32.2m and US$6.79m worth of receivables due within a year. So its liabilities total US$156.8m more than the combination of its cash and short-term receivables.

While this might seem like a lot, it is not so bad since MeiraGTx Holdings has a market capitalization of US$662.9m, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. 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 MeiraGTx Holdings'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 MeiraGTx Holdings

In the last year MeiraGTx Holdings wasn't profitable at an EBIT level, but managed to grow its revenue by 367%, to US$38m. When it comes to revenue growth, that's like nailing the game winning 3-pointer!

Caveat Emptor

Even though MeiraGTx Holdings managed to grow its top line quite deftly, the cold hard truth is that it is losing money on the EBIT line. Its EBIT loss was a whopping US$158m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled US$134m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. 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. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for MeiraGTx Holdings (of which 1 makes us a bit uncomfortable!) you should know about.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.