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 note that Myriad Genetics, Inc. (NASDAQ:MYGN) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?
Why Does Debt Bring Risk?
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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.
Check out our latest analysis for Myriad Genetics
How Much Debt Does Myriad Genetics Carry?
As you can see below, Myriad Genetics had US$38.8m of debt, at June 2024, which is about the same as the year before. You can click the chart for greater detail. But on the other hand it also has US$97.3m in cash, leading to a US$58.5m net cash position.
How Strong Is Myriad Genetics' Balance Sheet?
According to the last reported balance sheet, Myriad Genetics had liabilities of US$148.9m due within 12 months, and liabilities of US$195.7m due beyond 12 months. Offsetting this, it had US$97.3m in cash and US$117.8m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$129.5m.
Given Myriad Genetics has a market capitalization of US$1.99b, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, Myriad Genetics boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Myriad Genetics can strengthen its balance sheet over time. 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 15%, to US$802m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.
So How Risky Is Myriad Genetics?
By their very nature companies that are losing money are more risky than those with a long history of profitability. And in the last year Myriad Genetics had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of US$141m and booked a US$155m accounting loss. Given it only has net cash of US$58.5m, 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. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should be aware of the 4 warning signs we've spotted with Myriad Genetics .
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.
About NasdaqGS:MYGN
Myriad Genetics
A genetic testing and precision medicine company, develops genetic tests in the United States and internationally.
Undervalued with adequate balance sheet.