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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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Eyenovia, Inc. (NASDAQ:EYEN) does use debt in its business. But is this debt a concern to shareholders?
Why Does Debt Bring Risk?
Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. 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.
Check out our latest analysis for Eyenovia
How Much Debt Does Eyenovia Carry?
You can click the graphic below for the historical numbers, but it shows that as of March 2022 Eyenovia had US$7.74m of debt, an increase on US$1.09m, over one year. But on the other hand it also has US$26.7m in cash, leading to a US$19.0m net cash position.
How Healthy Is Eyenovia's Balance Sheet?
According to the last reported balance sheet, Eyenovia had liabilities of US$10.4m due within 12 months, and liabilities of US$15.1k due beyond 12 months. Offsetting these obligations, it had cash of US$26.7m as well as receivables valued at US$1.36m due within 12 months. So it actually has US$17.7m more liquid assets than total liabilities.
It's good to see that Eyenovia has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, Eyenovia 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 it is future earnings, more than anything, that will determine Eyenovia's ability to maintain a healthy balance sheet going forward. 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, Eyenovia reported revenue of US$12m, which is a gain of 200%, although it did not report any earnings before interest and tax. So its pretty obvious shareholders are hoping for more growth!