Is Syntec Optics Holdings (NASDAQ:OPTX) Using Too Much Debt?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Syntec Optics Holdings, Inc. (NASDAQ:OPTX) does use debt in its business. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Syntec Optics Holdings's Net Debt?

The chart below, which you can click on for greater detail, shows that Syntec Optics Holdings had US$9.62m in debt in June 2025; about the same as the year before. However, it also had US$287.1k in cash, and so its net debt is US$9.33m.

How Strong Is Syntec Optics Holdings' Balance Sheet?

According to the last reported balance sheet, Syntec Optics Holdings had liabilities of US$10.3m due within 12 months, and liabilities of US$3.98m due beyond 12 months. Offsetting these obligations, it had cash of US$287.1k as well as receivables valued at US$6.04m due within 12 months. So its liabilities total US$7.96m more than the combination of its cash and short-term receivables.

Of course, Syntec Optics Holdings has a market capitalization of US$56.9m, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Syntec Optics Holdings's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for Syntec Optics Holdings

Over 12 months, Syntec Optics Holdings reported revenue of US$29m, which is a gain of 2.5%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Importantly, Syntec Optics Holdings had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at US$946k. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through US$408k of cash over the last year. So to be blunt we think it is risky. 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. Be aware that Syntec Optics Holdings is showing 4 warning signs in our investment analysis , and 3 of those are a bit unpleasant...

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.