Rock star Growth Puts Nano Dimension (NASDAQ:NNDM) In A Position To Use Debt

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, Nano Dimension Ltd. (NASDAQ:NNDM) does carry debt. But the more important question is: how much risk is that debt creating?

When Is Debt A Problem?

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. 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. 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 Nano Dimension

What Is Nano Dimension's Debt?

As you can see below, at the end of March 2022, Nano Dimension had US$2.27m of debt, up from none a year ago. Click the image for more detail. But on the other hand it also has US$1.25b in cash, leading to a US$1.25b net cash position.

How Strong Is Nano Dimension's Balance Sheet?

We can see from the most recent balance sheet that Nano Dimension had liabilities of US$43.5m falling due within a year, and liabilities of US$22.9m due beyond that. On the other hand, it had cash of US$1.25b and US$13.5m worth of receivables due within a year. So it can boast US$1.20b more liquid assets than total liabilities.

This surplus strongly suggests that Nano Dimension 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. Succinctly put, Nano Dimension 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 Nano Dimension's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

In the last year Nano Dimension wasn't profitable at an EBIT level, but managed to grow its revenue by 473%, to US$20m. That's virtually the hole-in-one of revenue growth!

So How Risky Is Nano Dimension?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that Nano Dimension had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of US$70m and booked a US$225m accounting loss. With only US$1.25b on the balance sheet, it would appear that its going to need to raise capital again soon. Importantly, Nano Dimension's revenue growth is hot to trot. High growth pre-profit companies may well be risky, but they can also offer great rewards. 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. For example, we've discovered 1 warning sign for Nano Dimension that you should be aware of before investing here.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.