Does Rani Therapeutics Holdings (NASDAQ:RANI) Have A Healthy Balance Sheet?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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 Rani Therapeutics Holdings, Inc. (NASDAQ:RANI) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

When Is Debt Dangerous?

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. If things get really bad, the lenders can take control of the business. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

Check out our latest analysis for Rani Therapeutics Holdings

How Much Debt Does Rani Therapeutics Holdings Carry?

As you can see below, Rani Therapeutics Holdings had US$29.4m of debt, at March 2024, which is about the same as the year before. You can click the chart for greater detail. But it also has US$39.6m in cash to offset that, meaning it has US$10.1m net cash.

A Look At Rani Therapeutics Holdings' Liabilities

Zooming in on the latest balance sheet data, we can see that Rani Therapeutics Holdings had liabilities of US$13.4m due within 12 months and liabilities of US$25.6m due beyond that. Offsetting these obligations, it had cash of US$39.6m as well as receivables valued at US$166.0k due within 12 months. So these liquid assets roughly match the total liabilities.

This state of affairs indicates that Rani Therapeutics Holdings' balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the US$186.6m company is short on cash, but still worth keeping an eye on the balance sheet. Succinctly put, Rani Therapeutics Holdings 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 ultimately the future profitability of the business will decide if Rani Therapeutics Holdings can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Given it has no significant operating revenue at the moment, shareholders will be hoping Rani Therapeutics Holdings can make progress and gain better traction for the business, before it runs low on cash.

So How Risky Is Rani Therapeutics Holdings?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months Rani Therapeutics Holdings lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$49m of cash and made a loss of US$33m. Given it only has net cash of US$10.1m, the company may need to raise more capital if it doesn't reach break-even soon. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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 4 warning signs for Rani Therapeutics Holdings (of which 3 make us uncomfortable!) you should know about.

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.

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