Does Maravai LifeSciences Holdings (NASDAQ:MRVI) Have A Healthy Balance Sheet?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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. Importantly, Maravai LifeSciences Holdings, Inc. (NASDAQ:MRVI) does carry debt. But the real question is whether this debt is making the company risky.

Why Does Debt Bring Risk?

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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

Check out our latest analysis for Maravai LifeSciences Holdings

What Is Maravai LifeSciences Holdings's Net Debt?

As you can see below, Maravai LifeSciences Holdings had US$523.3m of debt, at March 2024, which is about the same as the year before. You can click the chart for greater detail. However, its balance sheet shows it holds US$561.7m in cash, so it actually has US$38.4m net cash.

A Look At Maravai LifeSciences Holdings' Liabilities

Zooming in on the latest balance sheet data, we can see that Maravai LifeSciences Holdings had liabilities of US$59.0m due within 12 months and liabilities of US$608.2m due beyond that. Offsetting this, it had US$561.7m in cash and US$39.5m in receivables that were due within 12 months. So it has liabilities totalling US$66.0m more than its cash and near-term receivables, combined.

Since publicly traded Maravai LifeSciences Holdings shares are worth a total of US$2.25b, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, Maravai LifeSciences Holdings also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Maravai LifeSciences Holdings 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, Maravai LifeSciences Holdings made a loss at the EBIT level, and saw its revenue drop to US$274m, which is a fall of 62%. That makes us nervous, to say the least.

So How Risky Is Maravai LifeSciences Holdings?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year Maravai LifeSciences Holdings had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$31m of cash and made a loss of US$131m. Given it only has net cash of US$38.4m, the company may need to raise more capital if it doesn't reach break-even soon. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. For riskier companies like Maravai LifeSciences Holdings I always like to keep an eye on the long term profit and revenue trends. Fortunately, you can click to see our interactive graph of its profit, revenue, and operating cashflow.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.

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