Is HyreCar (NASDAQ:HYRE) Using Debt In A Risky Way?

Warren Buffett famously said, '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, HyreCar Inc. (NASDAQ:HYRE) does carry debt. But the real question is whether this debt is making the company risky.

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. 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.

View our latest analysis for HyreCar

What Is HyreCar's Net Debt?

As you can see below, HyreCar had US$2.00m of debt, at June 2021, which is about the same as the year before. You can click the chart for greater detail. However, it does have US$24.0m in cash offsetting this, leading to net cash of US$22.0m.

A Look At HyreCar's Liabilities

According to the balance sheet data, HyreCar had liabilities of US$14.9m due within 12 months, but no longer term liabilities. Offsetting this, it had US$24.0m in cash and US$101.6k in receivables that were due within 12 months. So it can boast US$9.25m more liquid assets than total liabilities.

This surplus suggests that HyreCar has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that HyreCar 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 HyreCar 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.

Over 12 months, HyreCar reported revenue of US$30m, which is a gain of 53%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

So How Risky Is HyreCar?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that HyreCar had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through US$10m of cash and made a loss of US$24m. With only US$22.0m on the balance sheet, it would appear that its going to need to raise capital again soon. With very solid revenue growth in the last year, HyreCar may be on a path to profitability. Pre-profit companies are often 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. We've identified 3 warning signs with HyreCar , and understanding them should be part of your investment process.

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.

If you’re looking to trade HyreCar, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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