Does Arcus Biosciences (NYSE:RCUS) Have A Healthy Balance Sheet?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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. Importantly, Arcus Biosciences, Inc. (NYSE:RCUS) does carry debt. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

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 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. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Arcus Biosciences's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Arcus Biosciences had US$69.0m of debt, an increase on US$20.0m, over one year. However, its balance sheet shows it holds US$997.0m in cash, so it actually has US$928.0m net cash.

How Strong Is Arcus Biosciences' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Arcus Biosciences had liabilities of US$192.0m due within 12 months and liabilities of US$433.0m due beyond that. On the other hand, it had cash of US$997.0m and US$21.0m worth of receivables due within a year. So it actually has US$393.0m more liquid assets than total liabilities.

This surplus strongly suggests that Arcus Biosciences has a rock-solid balance sheet (and the debt is of no concern whatsoever). On this view, lenders should feel as safe as the beloved of a black-belt karate master. Simply put, the fact that Arcus Biosciences 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 Arcus Biosciences's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

See our latest analysis for Arcus Biosciences

Over 12 months, Arcus Biosciences made a loss at the EBIT level, and saw its revenue drop to US$141m, which is a fall of 41%. That makes us nervous, to say the least.

So How Risky Is Arcus Biosciences?

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 Arcus Biosciences had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$303m of cash and made a loss of US$391m. While this does make the company a bit risky, it's important to remember it has net cash of US$928.0m. That means it could keep spending at its current rate for more than two years. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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. Be aware that Arcus Biosciences is showing 2 warning signs in our investment analysis , you should know about...

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.