Is TG Therapeutics (NASDAQ:TGTX) Weighed On By Its Debt Load?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that TG Therapeutics, Inc. (NASDAQ:TGTX) does use debt in its business. But the real question is whether this debt is making the company risky.

What Risk Does Debt Bring?

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. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

Check out our latest analysis for TG Therapeutics

What Is TG Therapeutics's Net Debt?

As you can see below, at the end of September 2022, TG Therapeutics had US$70.2m of debt, up from US$16.6m a year ago. Click the image for more detail. However, it does have US$175.9m in cash offsetting this, leading to net cash of US$105.8m.

A Look At TG Therapeutics' Liabilities

Zooming in on the latest balance sheet data, we can see that TG Therapeutics had liabilities of US$36.4m due within 12 months and liabilities of US$81.0m due beyond that. Offsetting these obligations, it had cash of US$175.9m as well as receivables valued at US$88.0k due within 12 months. So it actually has US$58.6m more liquid assets than total liabilities.

This short term liquidity is a sign that TG Therapeutics could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that TG Therapeutics has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if TG 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, TG Therapeutics reported revenue of US$5.0m, which is a gain of 14%, 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 we do note that TG Therapeutics had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of US$239m and booked a US$239m accounting loss. With only US$105.8m on the balance sheet, it would appear that its going to need to raise capital again soon. 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. 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. We've identified 3 warning signs with TG Therapeutics (at least 1 which is concerning) , 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.