Ocular Therapeutix (NASDAQ:OCUL) Has Debt But No Earnings; Should You Worry?

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.' 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. We note that Ocular Therapeutix, Inc. (NASDAQ:OCUL) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Why Does Debt Bring Risk?

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 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, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Ocular Therapeutix Carry?

As you can see below, at the end of March 2025, Ocular Therapeutix had US$69.2m of debt, up from US$66.5m a year ago. Click the image for more detail. However, its balance sheet shows it holds US$349.7m in cash, so it actually has US$280.5m net cash.

How Strong Is Ocular Therapeutix's Balance Sheet?

According to the last reported balance sheet, Ocular Therapeutix had liabilities of US$37.9m due within 12 months, and liabilities of US$102.1m due beyond 12 months. Offsetting this, it had US$349.7m in cash and US$25.2m in receivables that were due within 12 months. So it actually has US$234.9m more liquid assets than total liabilities.

This excess liquidity suggests that Ocular Therapeutix is taking a careful approach to debt. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Simply put, the fact that Ocular Therapeutix has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Ocular Therapeutix 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.

View our latest analysis for Ocular Therapeutix

In the last year Ocular Therapeutix's revenue was pretty flat, and it made a negative EBIT. While that hardly impresses, its not too bad either.

So How Risky Is Ocular Therapeutix?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Ocular Therapeutix 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$148m and booked a US$193m accounting loss. But at least it has US$280.5m 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. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for Ocular Therapeutix you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.