Does Myriad Genetics (NASDAQ:MYGN) Have A Healthy Balance Sheet?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Myriad Genetics, Inc. (NASDAQ:MYGN) makes use of debt. But the real question is whether this debt is making the company risky.

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. 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.

See our latest analysis for Myriad Genetics

How Much Debt Does Myriad Genetics Carry?

The image below, which you can click on for greater detail, shows that at December 2023 Myriad Genetics had debt of US$38.5m, up from none in one year. However, its balance sheet shows it holds US$140.9m in cash, so it actually has US$102.4m net cash.

How Strong Is Myriad Genetics' Balance Sheet?

We can see from the most recent balance sheet that Myriad Genetics had liabilities of US$155.9m falling due within a year, and liabilities of US$207.4m due beyond that. Offsetting these obligations, it had cash of US$140.9m as well as receivables valued at US$114.3m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$108.1m.

Since publicly traded Myriad Genetics shares are worth a total of US$1.92b, 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, Myriad Genetics 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 Myriad Genetics'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 Myriad Genetics wasn't profitable at an EBIT level, but managed to grow its revenue by 11%, to US$753m. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Myriad Genetics?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Myriad Genetics lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$184m of cash and made a loss of US$263m. Given it only has net cash of US$102.4m, the company may need to raise more capital if it doesn't reach break-even soon. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. We've identified 1 warning sign with Myriad Genetics , and understanding them should be part of your investment process.

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.