Does Marinus Pharmaceuticals (NASDAQ:MRNS) Have A Healthy Balance Sheet?

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.' 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. Importantly, Marinus Pharmaceuticals, Inc. (NASDAQ:MRNS) 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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for Marinus Pharmaceuticals

How Much Debt Does Marinus Pharmaceuticals Carry?

You can click the graphic below for the historical numbers, but it shows that as of September 2021 Marinus Pharmaceuticals had US$40.6m of debt, an increase on none, over one year. However, its balance sheet shows it holds US$145.1m in cash, so it actually has US$104.5m net cash.

How Strong Is Marinus Pharmaceuticals' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Marinus Pharmaceuticals had liabilities of US$37.7m due within 12 months and liabilities of US$42.7m due beyond that. On the other hand, it had cash of US$145.1m and US$3.53m worth of receivables due within a year. So it actually has US$68.3m more liquid assets than total liabilities.

This surplus suggests that Marinus Pharmaceuticals 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. Succinctly put, Marinus Pharmaceuticals boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Marinus Pharmaceuticals can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Over 12 months, Marinus Pharmaceuticals reported revenue of US$15m, which is a gain of 8,889%, although it did not report any earnings before interest and tax. That's virtually the hole-in-one of revenue growth!

So How Risky Is Marinus Pharmaceuticals?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that Marinus Pharmaceuticals had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through US$52m of cash and made a loss of US$88m. But at least it has US$104.5m on the balance sheet to spend on growth, near-term. The good news for shareholders is that Marinus Pharmaceuticals 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. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 3 warning signs for Marinus Pharmaceuticals that you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.