Does Intrusion (NASDAQ:INTZ) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. Importantly, Intrusion Inc. (NASDAQ:INTZ) does carry debt. But is this debt a concern to shareholders?

Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest 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.

See our latest analysis for Intrusion

How Much Debt Does Intrusion Carry?

As you can see below, at the end of March 2022, Intrusion had US$4.64m of debt, up from US$635.0k a year ago. Click the image for more detail. However, it does have US$6.08m in cash offsetting this, leading to net cash of US$1.44m.

How Strong Is Intrusion's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Intrusion had liabilities of US$6.58m due within 12 months and liabilities of US$3.53m due beyond that. Offsetting this, it had US$6.08m in cash and US$1.17m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$2.86m.

Given Intrusion has a market capitalization of US$51.2m, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, Intrusion boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Intrusion'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.

In the last year Intrusion wasn't profitable at an EBIT level, but managed to grow its revenue by 8.7%, to US$7.3m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is Intrusion?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Intrusion lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$18m and booked a US$19m accounting loss. With only US$1.44m on the balance sheet, it would appear that its going to need to raise capital again soon. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. 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. Case in point: We've spotted 5 warning signs for Intrusion you should be aware of, and 1 of them makes us a bit uncomfortable.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.