TG Therapeutics (NASDAQ:TGTX) Takes On Some Risk With Its Use Of Debt

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.' 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 note that TG Therapeutics, Inc. (NASDAQ:TGTX) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is TG Therapeutics's Net Debt?

As you can see below, at the end of June 2025, TG Therapeutics had US$245.8m of debt, up from US$102.9m a year ago. Click the image for more detail. However, its balance sheet shows it holds US$251.9m in cash, so it actually has US$6.02m net cash.

How Healthy Is TG Therapeutics' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that TG Therapeutics had liabilities of US$171.9m due within 12 months and liabilities of US$254.3m due beyond that. On the other hand, it had cash of US$251.9m and US$231.5m worth of receivables due within a year. So it can boast US$57.2m 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 while it's hard to imagine that the US$5.14b company is struggling for cash, we still think it's worth monitoring its balance sheet. Simply put, the fact that TG Therapeutics has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for TG Therapeutics

The bad news is that TG Therapeutics saw its EBIT decline by 16% over the last year. If earnings continue to decline at that rate then handling the debt will be more difficult than taking three children under 5 to a fancy pants restaurant. 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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While TG Therapeutics has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last two years, TG Therapeutics reported free cash flow worth 4.6% of its EBIT, which is really quite low. That limp level of cash conversion undermines its ability to manage and pay down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that TG Therapeutics has net cash of US$6.02m, as well as more liquid assets than liabilities. So although we see some areas for improvement, we're not too worried about TG Therapeutics's balance sheet. 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. Case in point: We've spotted 3 warning signs for TG Therapeutics you should be aware of, and 1 of them is a bit concerning.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.