Does REGENXBIO (NASDAQ:RGNX) 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.' 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 can see that REGENXBIO Inc. (NASDAQ:RGNX) does use debt in its business. But the real question is whether this debt is making the company risky.

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. 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, 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 examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for REGENXBIO

What Is REGENXBIO's Debt?

The image below, which you can click on for greater detail, shows that REGENXBIO had debt of US$73.2m at the end of June 2024, a reduction from US$116.3m over a year. However, its balance sheet shows it holds US$290.4m in cash, so it actually has US$217.2m net cash.

A Look At REGENXBIO's Liabilities

Zooming in on the latest balance sheet data, we can see that REGENXBIO had liabilities of US$98.3m due within 12 months and liabilities of US$122.8m due beyond that. On the other hand, it had cash of US$290.4m and US$45.1m worth of receivables due within a year. So it actually has US$114.4m more liquid assets than total liabilities.

It's good to see that REGENXBIO has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Succinctly put, REGENXBIO 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 REGENXBIO 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.

In the last year REGENXBIO had a loss before interest and tax, and actually shrunk its revenue by 8.2%, to US$89m. We would much prefer see growth.

So How Risky Is REGENXBIO?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months REGENXBIO lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$195m and booked a US$241m accounting loss. But at least it has US$217.2m 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. 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. To that end, you should learn about the 3 warning signs we've spotted with REGENXBIO (including 1 which is potentially serious) .

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.