Does Revance Therapeutics (NASDAQ:RVNC) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. We can see that Revance Therapeutics, Inc. (NASDAQ:RVNC) does use debt in its business. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for Revance Therapeutics

How Much Debt Does Revance Therapeutics Carry?

You can click the graphic below for the historical numbers, but it shows that as of December 2022 Revance Therapeutics had US$379.4m of debt, an increase on US$280.6m, over one year. On the flip side, it has US$340.7m in cash leading to net debt of about US$38.7m.

A Look At Revance Therapeutics' Liabilities

We can see from the most recent balance sheet that Revance Therapeutics had liabilities of US$75.7m falling due within a year, and liabilities of US$493.6m due beyond that. On the other hand, it had cash of US$340.7m and US$11.3m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$217.3m.

Since publicly traded Revance Therapeutics shares are worth a total of US$2.55b, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. 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 Revance Therapeutics 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.

Over 12 months, Revance Therapeutics reported revenue of US$133m, which is a gain of 70%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Despite the top line growth, Revance Therapeutics still had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping US$272m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled US$197m in negative free cash flow over the last twelve months. So in short it's a really risky stock. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - Revance Therapeutics has 3 warning signs we think you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.