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Does Calyxt (NASDAQ:CLXT) Have A Healthy Balance Sheet?

Simply Wall St

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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 Calyxt, Inc. (NASDAQ:CLXT) does use debt in its business. But the more important question is: how much risk is that debt creating?

When Is Debt Dangerous?

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. If things get really bad, the lenders can take control of the business. 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, plenty of companies use debt to fund growth, without any negative consequences. 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 Calyxt

What Is Calyxt's Net Debt?

As you can see below, at the end of June 2020, Calyxt had US$1.52m of debt, up from none a year ago. Click the image for more detail. But on the other hand it also has US$33.8m in cash, leading to a US$32.3m net cash position.


How Healthy Is Calyxt's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Calyxt had liabilities of US$4.65m due within 12 months and liabilities of US$19.8m due beyond that. Offsetting this, it had US$33.8m in cash and US$2.41m in receivables that were due within 12 months. So it can boast US$11.8m more liquid assets than total liabilities.

This surplus suggests that Calyxt has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Calyxt has more cash than debt is arguably a good indication that it can manage its debt safely. 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 Calyxt'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, Calyxt reported revenue of US$11m, which is a gain of 1,721%, although it did not report any earnings before interest and tax. When it comes to revenue growth, that's like nailing the game winning 3-pointer!

So How Risky Is Calyxt?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months Calyxt lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$43.9m of cash and made a loss of US$44.8m. However, it has net cash of US$32.3m, so it has a bit of time before it will need more capital. Importantly, Calyxt's revenue growth is hot to trot. While unprofitable companies can be risky, they can also grow hard and fast in those pre-profit years. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Calyxt (of which 1 makes us a bit uncomfortable!) you should know about.

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.

This article by Simply Wall St is general in nature. 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.