Is Silvaco Group (NASDAQ:SVCO) A Risky Investment?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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 Silvaco Group, Inc. (NASDAQ:SVCO) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. 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. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Silvaco Group Carry?

The image below, which you can click on for greater detail, shows that Silvaco Group had debt of US$4.19m at the end of March 2025, a reduction from US$6.30m over a year. But on the other hand it also has US$74.5m in cash, leading to a US$70.4m net cash position.

How Healthy Is Silvaco Group's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Silvaco Group had liabilities of US$46.7m due within 12 months and liabilities of US$7.80m due beyond that. Offsetting this, it had US$74.5m in cash and US$20.9m in receivables that were due within 12 months. So it actually has US$40.9m more liquid assets than total liabilities.

It's good to see that Silvaco Group has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Simply put, the fact that Silvaco Group has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Silvaco Group 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.

View our latest analysis for Silvaco Group

In the last year Silvaco Group wasn't profitable at an EBIT level, but managed to grow its revenue by 3.7%, to US$58m. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Silvaco Group?

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 Silvaco Group lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$19m of cash and made a loss of US$60m. While this does make the company a bit risky, it's important to remember it has net cash of US$70.4m. That kitty means the company can keep spending for growth for at least two years, at current rates. 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. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. We've identified 1 warning sign with Silvaco Group , and understanding them should be part of your investment process.

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.