Health Check: How Prudently Does Amtech Systems (NASDAQ:ASYS) Use Debt?

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

Why Does Debt Bring Risk?

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. 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, 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. When we think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for Amtech Systems

How Much Debt Does Amtech Systems Carry?

The image below, which you can click on for greater detail, shows that Amtech Systems had debt of US$4.20m at the end of March 2024, a reduction from US$11.6m over a year. But it also has US$13.0m in cash to offset that, meaning it has US$8.80m net cash.

How Healthy Is Amtech Systems' Balance Sheet?

The latest balance sheet data shows that Amtech Systems had liabilities of US$25.9m due within a year, and liabilities of US$9.67m falling due after that. On the other hand, it had cash of US$13.0m and US$21.7m worth of receivables due within a year. So its liabilities total US$896.0k more than the combination of its cash and short-term receivables.

Having regard to Amtech Systems' size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the US$86.8m company is short on cash, but still worth keeping an eye on the balance sheet. Despite its noteworthy liabilities, Amtech Systems boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Amtech Systems 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, Amtech Systems saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that hardly impresses, its not too bad either.

So How Risky Is Amtech Systems?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Amtech Systems lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$965k of cash and made a loss of US$21m. With only US$8.80m on the balance sheet, it would appear that its going to need to raise capital again soon. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. 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. We've identified 2 warning signs with Amtech Systems , and understanding them should be part of your investment process.

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.

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