Does Lyft (NASDAQ:LYFT) Have A Healthy Balance Sheet?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Lyft, Inc. (NASDAQ:LYFT) makes use of debt. But the real question is whether this debt is making the company risky.

What Risk Does Debt Bring?

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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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.

Check out our latest analysis for Lyft

How Much Debt Does Lyft Carry?

You can click the graphic below for the historical numbers, but it shows that as of September 2021 Lyft had US$712.0m of debt, an increase on US$659.2m, over one year. But it also has US$2.38b in cash to offset that, meaning it has US$1.67b net cash.

How Healthy Is Lyft's Balance Sheet?

The latest balance sheet data shows that Lyft had liabilities of US$2.40b due within a year, and liabilities of US$940.3m falling due after that. On the other hand, it had cash of US$2.38b and US$166.3m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$791.6m.

Since publicly traded Lyft shares are worth a very impressive total of US$15.0b, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, Lyft boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Lyft can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year Lyft's revenue was pretty flat, and it made a negative EBIT. While that's not too bad, we'd prefer see growth.

So How Risky Is Lyft?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that Lyft 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$420m and booked a US$1.2b accounting loss. But the saving grace is the US$1.67b on the balance sheet. That means it could keep spending at its current rate for more than two years. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - Lyft has 3 warning signs we think you should be aware of.

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.

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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.