Is TransAct Technologies (NASDAQ:TACT) Weighed On By Its Debt Load?

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.' 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. We note that TransAct Technologies Incorporated (NASDAQ:TACT) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

What Risk Does Debt Bring?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does TransAct Technologies Carry?

As you can see below, at the end of March 2025, TransAct Technologies had US$3.00m of debt, up from US$2.25m a year ago. Click the image for more detail. However, its balance sheet shows it holds US$14.2m in cash, so it actually has US$11.2m net cash.

How Healthy Is TransAct Technologies' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that TransAct Technologies had liabilities of US$12.8m due within 12 months and liabilities of US$471.0k due beyond that. Offsetting these obligations, it had cash of US$14.2m as well as receivables valued at US$9.06m due within 12 months. So it can boast US$10.0m more liquid assets than total liabilities.

This surplus suggests that TransAct Technologies is using debt in a way that is appears to be both safe and conservative. Due to its strong net asset position, it is not likely to face issues with its lenders. Simply put, the fact that TransAct Technologies 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 TransAct Technologies 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 TransAct Technologies

Over 12 months, TransAct Technologies made a loss at the EBIT level, and saw its revenue drop to US$46m, which is a fall of 25%. That makes us nervous, to say the least.

So How Risky Is TransAct Technologies?

While TransAct Technologies lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$3.0m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. With mediocre revenue growth in the last year, we're don't find the investment opportunity particularly compelling. 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. For instance, we've identified 1 warning sign for TransAct Technologies that you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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.