Is TG Therapeutics (NASDAQ:TGTX) A Risky Investment?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 TG Therapeutics, Inc. (NASDAQ:TGTX) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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.

View our latest analysis for TG Therapeutics

How Much Debt Does TG Therapeutics Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2023 TG Therapeutics had US$96.8m of debt, an increase on US$67.4m, over one year. However, it does have US$139.7m in cash offsetting this, leading to net cash of US$42.9m.

A Look At TG Therapeutics' Liabilities

We can see from the most recent balance sheet that TG Therapeutics had liabilities of US$63.1m falling due within a year, and liabilities of US$106.8m due beyond that. On the other hand, it had cash of US$139.7m and US$8.62m worth of receivables due within a year. So it has liabilities totalling US$21.6m more than its cash and near-term receivables, combined.

This state of affairs indicates that TG Therapeutics' balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the US$2.97b company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, TG Therapeutics 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 it is future earnings, more than anything, that will determine TG Therapeutics's ability to maintain a healthy balance sheet going forward. 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, TG Therapeutics reported revenue of US$8.6m, which is a gain of 8.3%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is TG Therapeutics?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year TG Therapeutics had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$167m of cash and made a loss of US$169m. Given it only has net cash of US$42.9m, the company may need to raise more capital if it doesn't reach break-even soon. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. 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. We've identified 4 warning signs with TG Therapeutics , and understanding them should be part of your investment process.

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.