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.' 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. We can see that Marinus Pharmaceuticals, Inc. (NASDAQ:MRNS) does use debt in its business. But the more important question is: how much risk is that debt creating?

What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

Check out our latest analysis for Marinus Pharmaceuticals

How Much Debt Does Marinus Pharmaceuticals Carry?

The image below, which you can click on for greater detail, shows that at September 2023 Marinus Pharmaceuticals had debt of US$107.2m, up from US$70.8m in one year. However, its balance sheet shows it holds US$176.4m in cash, so it actually has US$69.1m net cash.

How Strong Is Marinus Pharmaceuticals' Balance Sheet?

We can see from the most recent balance sheet that Marinus Pharmaceuticals had liabilities of US$30.6m falling due within a year, and liabilities of US$115.7m due beyond that. On the other hand, it had cash of US$176.4m and US$4.28m worth of receivables due within a year. So it actually has US$34.4m more liquid assets than total liabilities.

This short term liquidity is a sign that Marinus Pharmaceuticals could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Marinus Pharmaceuticals boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. 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.

In the last year Marinus Pharmaceuticals wasn't profitable at an EBIT level, but managed to grow its revenue by 56%, to US$31m. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is Marinus Pharmaceuticals?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that Marinus Pharmaceuticals had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of US$113m and booked a US$134m accounting loss. However, it has net cash of US$69.1m, so it has a bit of time before it will need more capital. Marinus Pharmaceuticals's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. Pre-profit companies are often risky, but they can also offer great rewards. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. We've identified 2 warning signs with Marinus Pharmaceuticals , and understanding them should be part of your investment process.

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.

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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.