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

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. We can see that Lyft, Inc. (NASDAQ:LYFT) does use debt in its business. But should shareholders be worried about its use of debt?

When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. When we think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for Lyft

What Is Lyft's Debt?

As you can see below, at the end of March 2024, Lyft had US$971.5m of debt, up from US$823.3m a year ago. Click the image for more detail. But it also has US$1.67b in cash to offset that, meaning it has US$694.1m net cash.

A Look At Lyft's Liabilities

Zooming in on the latest balance sheet data, we can see that Lyft had liabilities of US$3.12b due within 12 months and liabilities of US$1.15b due beyond that. Offsetting this, it had US$1.67b in cash and US$281.8m in receivables that were due within 12 months. So it has liabilities totalling US$2.32b more than its cash and near-term receivables, combined.

Lyft has a market capitalization of US$5.29b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. While it does have liabilities worth noting, Lyft also has more cash than debt, so we're pretty confident it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Lyft's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year Lyft wasn't profitable at an EBIT level, but managed to grow its revenue by 11%, to US$4.7b. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Lyft?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Lyft had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$153k of cash and made a loss of US$184m. But the saving grace is the US$694.1m on the balance sheet. That means it could keep spending at its current rate for more than two years. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 1 warning sign for Lyft that you should be aware of before investing here.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.

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