TG Therapeutics (NASDAQ:TGTX) Has Debt But No Earnings; Should You Worry?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 TG Therapeutics, Inc. (NASDAQ:TGTX) does have debt on its balance sheet. But is this debt a concern to shareholders?

When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for TG Therapeutics

What Is TG Therapeutics's Net Debt?

The image below, which you can click on for greater detail, shows that at September 2024 TG Therapeutics had debt of US$244.2m, up from US$99.1m in one year. But on the other hand it also has US$341.0m in cash, leading to a US$96.9m net cash position.

A Look At TG Therapeutics' Liabilities

According to the last reported balance sheet, TG Therapeutics had liabilities of US$125.1m due within 12 months, and liabilities of US$268.7m due beyond 12 months. On the other hand, it had cash of US$341.0m and US$115.7m worth of receivables due within a year. So it can boast US$62.9m more liquid assets than total liabilities.

Having regard to TG Therapeutics' size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the US$4.31b company is short on cash, but still worth keeping an eye on the balance sheet. Succinctly put, TG Therapeutics boasts net cash, so it's fair to say it does not have a heavy debt load! 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're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year TG Therapeutics wasn't profitable at an EBIT level, but managed to grow its revenue by 40%, to US$265m. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is TG Therapeutics?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And in the last year TG Therapeutics had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of US$28m and booked a US$14m accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of US$96.9m. That means it could keep spending at its current rate for more than two years. TG Therapeutics's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. Pre-profit companies are often risky, but they can also offer great rewards. 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. For example, we've discovered 1 warning sign for TG Therapeutics that you should be aware of before investing here.

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.