Is Intellia Therapeutics (NASDAQ:NTLA) Weighed On By Its Debt Load?

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.' 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, Intellia Therapeutics, Inc. (NASDAQ:NTLA) does carry debt. But should shareholders be worried about its use of debt?

When Is Debt A Problem?

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

View our latest analysis for Intellia Therapeutics

What Is Intellia Therapeutics's Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2022 Intellia Therapeutics had US$71.8m of debt, an increase on none, over one year. But on the other hand it also has US$855.3m in cash, leading to a US$783.4m net cash position.

How Strong Is Intellia Therapeutics' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Intellia Therapeutics had liabilities of US$126.1m due within 12 months and liabilities of US$122.9m due beyond that. Offsetting this, it had US$855.3m in cash and US$1.80m in receivables that were due within 12 months. So it can boast US$608.0m more liquid assets than total liabilities.

This surplus suggests that Intellia Therapeutics has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Intellia Therapeutics boasts net cash, so it's fair to say it does not have a heavy debt load! 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 Intellia Therapeutics'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.

Over 12 months, Intellia Therapeutics reported revenue of US$45m, which is a gain of 8.4%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Intellia Therapeutics?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year Intellia Therapeutics had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$309m of cash and made a loss of US$400m. But at least it has US$783.4m on the balance sheet to spend on growth, near-term. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. We've identified 3 warning signs with Intellia Therapeutics , and understanding them should be part of your investment process.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.