Is Quanterix (NASDAQ:QTRX) A Risky Investment?

By
Simply Wall St
Published
July 25, 2021
NasdaqGM:QTRX
Source: Shutterstock

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that Quanterix Corporation (NASDAQ:QTRX) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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. 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, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

See our latest analysis for Quanterix

What Is Quanterix's Debt?

As you can see below, Quanterix had US$7.69m of debt, at March 2021, 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$442.7m in cash, leading to a US$435.0m net cash position.

debt-equity-history-analysis
NasdaqGM:QTRX Debt to Equity History July 25th 2021

A Look At Quanterix's Liabilities

The latest balance sheet data shows that Quanterix had liabilities of US$36.5m due within a year, and liabilities of US$24.7m falling due after that. Offsetting this, it had US$442.7m in cash and US$14.9m in receivables that were due within 12 months. So it actually has US$396.4m more liquid assets than total liabilities.

This excess liquidity suggests that Quanterix 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 Quanterix has more cash than debt is arguably a good indication that 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 Quanterix'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 Quanterix wasn't profitable at an EBIT level, but managed to grow its revenue by 63%, to US$98m. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is Quanterix?

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 Quanterix lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$28m and booked a US$30m accounting loss. But at least it has US$435.0m on the balance sheet to spend on growth, near-term. With very solid revenue growth in the last year, Quanterix may be on a path to profitability. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. 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. For instance, we've identified 4 warning signs for Quanterix that you should be aware of.

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. 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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