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Does Intellia Therapeutics (NASDAQ:NTLA) Have A Healthy Balance Sheet?

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Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, Intellia Therapeutics, Inc. (NASDAQ:NTLA) does carry debt. 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. 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. 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 Intellia Therapeutics

What Is Intellia Therapeutics's Debt?

The image below, which you can click on for greater detail, shows that at March 2022 Intellia Therapeutics had debt of US$71.8m, up from none in one year. However, its balance sheet shows it holds US$855.3m in cash, so it actually has US$783.4m net cash.

debt-equity-history-analysis
debt-equity-history-analysis

How Strong Is Intellia Therapeutics' Balance Sheet?

We can see from the most recent balance sheet that Intellia Therapeutics had liabilities of US$126.1m falling due within a year, and liabilities of US$122.9m due beyond that. Offsetting these obligations, it had cash of US$855.3m as well as receivables valued at US$1.80m due within 12 months. So it can boast US$608.0m more liquid assets than total liabilities.

This surplus suggests that Intellia Therapeutics has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Intellia Therapeutics 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 ultimately the future profitability of the business will decide if Intellia Therapeutics can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year Intellia Therapeutics wasn't profitable at an EBIT level, but managed to grow its revenue by 8.4%, to US$45m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is Intellia Therapeutics?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year Intellia Therapeutics had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of US$309m and booked a US$400m accounting loss. But at least it has US$783.4m on the balance sheet to spend on growth, near-term. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Intellia Therapeutics you should know about.

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.

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