Is Myriad Genetics (NASDAQ:MYGN) Weighed On By Its Debt Load?

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. Importantly, Myriad Genetics, Inc. (NASDAQ:MYGN) does carry debt. But should shareholders be worried about its use of debt?

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. 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. 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.

See our latest analysis for Myriad Genetics

How Much Debt Does Myriad Genetics Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2024 Myriad Genetics had US$38.7m of debt, an increase on none, over one year. However, it does have US$104.3m in cash offsetting this, leading to net cash of US$65.6m.

How Strong Is Myriad Genetics' Balance Sheet?

We can see from the most recent balance sheet that Myriad Genetics had liabilities of US$146.1m falling due within a year, and liabilities of US$204.4m due beyond that. Offsetting this, it had US$104.3m in cash and US$118.1m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$128.1m.

Since publicly traded Myriad Genetics shares are worth a total of US$2.41b, 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. The balance sheet is clearly the area to focus on when you are analysing debt. 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're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year Myriad Genetics wasn't profitable at an EBIT level, but managed to grow its revenue by 11%, to US$774m. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Myriad Genetics?

Statistically speaking companies that lose money are riskier than those that make money. 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$155m of cash and made a loss of US$235m. Given it only has net cash of US$65.6m, 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. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 4 warning signs for Myriad Genetics that you should be aware of before investing here.

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.

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