Does Exicure (NASDAQ:XCUR) 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 Exicure, Inc. (NASDAQ:XCUR) does use debt in its business. But should shareholders be worried about its use of debt?

When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. 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.

Check out our latest analysis for Exicure

What Is Exicure's Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2020 Exicure had US$16.5m of debt, an increase on US$4.91m, over one year. However, it does have US$94.1m in cash offsetting this, leading to net cash of US$77.6m.

How Healthy Is Exicure's Balance Sheet?

The latest balance sheet data shows that Exicure had liabilities of US$12.6m due within a year, and liabilities of US$25.2m falling due after that. On the other hand, it had cash of US$94.1m and US$448.0k worth of receivables due within a year. So it can boast US$56.7m more liquid assets than total liabilities.

This surplus strongly suggests that Exicure has a rock-solid balance sheet (and the debt is of no concern whatsoever). With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Simply put, the fact that Exicure has more cash than debt is arguably a good indication that it can manage its debt safely. 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 Exicure'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, Exicure reported revenue of US$17m, which is a gain of 1,586%, although it did not report any earnings before interest and tax. When it comes to revenue growth, that's like nailing the game winning 3-pointer!

So How Risky Is Exicure?

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 Exicure had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$16m of cash and made a loss of US$22m. But the saving grace is the US$77.6m on the balance sheet. That means it could keep spending at its current rate for more than two years. Importantly, Exicure's revenue growth is hot to trot. High growth pre-profit companies may well be risky, but they can also offer great rewards. 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. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Exicure (of which 1 is significant!) you should know about.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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This article by Simply Wall St is general in nature. 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.
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