In This Article:
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.' 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 Cerus Corporation (NASDAQ:CERS) does use debt in its business. But the real question is whether this debt is making the company risky.
Why Does Debt Bring Risk?
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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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 Cerus
How Much Debt Does Cerus Carry?
As you can see below, Cerus had US$44.5m of debt, at September 2020, which is about the same as the year before. You can click the chart for greater detail. But it also has US$135.1m in cash to offset that, meaning it has US$90.6m net cash.
How Strong Is Cerus's Balance Sheet?
The latest balance sheet data shows that Cerus had liabilities of US$46.2m due within a year, and liabilities of US$57.9m falling due after that. On the other hand, it had cash of US$135.1m and US$17.5m worth of receivables due within a year. So it can boast US$48.5m more liquid assets than total liabilities.
This surplus suggests that Cerus has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Cerus boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Cerus'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.
Over 12 months, Cerus reported revenue of US$85m, which is a gain of 20%, 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.