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

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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 and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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, 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. When we think about a company's use of debt, we first look at cash and debt together.

Check out our latest analysis for Maravai LifeSciences Holdings

What Is Maravai LifeSciences Holdings's Debt?

The chart below, which you can click on for greater detail, shows that Maravai LifeSciences Holdings had US$522.5m in debt in June 2024; about the same as the year before. But on the other hand it also has US$579.7m in cash, leading to a US$57.2m net cash position.

How Strong Is Maravai LifeSciences Holdings' Balance Sheet?

We can see from the most recent balance sheet that Maravai LifeSciences Holdings had liabilities of US$68.6m falling due within a year, and liabilities of US$602.6m due beyond that. Offsetting these obligations, it had cash of US$579.7m as well as receivables valued at US$39.3m due within 12 months. So it has liabilities totalling US$52.2m more than its cash and near-term receivables, combined.

Since publicly traded Maravai LifeSciences Holdings shares are worth a total of US$2.02b, 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 it is future earnings, more than anything, that will determine Maravai LifeSciences 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.

In the last year Maravai LifeSciences Holdings had a loss before interest and tax, and actually shrunk its revenue by 49%, to US$279m. 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$17m of cash and made a loss of US$132m. With only US$57.2m on the balance sheet, it would appear that its going to need to raise capital again soon. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how Maravai LifeSciences Holdings's profit, revenue, and operating cashflow have changed over the last few years.

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.

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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.