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Is SI-BONE (NASDAQ:SIBN) Using Too Much Debt?

·4 min read

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. As with many other companies SI-BONE, Inc. (NASDAQ:SIBN) makes use of debt. But the more important question is: how much risk is that debt creating?

When Is Debt Dangerous?

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. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

Check out our latest analysis for SI-BONE

How Much Debt Does SI-BONE Carry?

The chart below, which you can click on for greater detail, shows that SI-BONE had US$35.1m in debt in June 2022; about the same as the year before. But on the other hand it also has US$114.4m in cash, leading to a US$79.3m net cash position.

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

How Strong Is SI-BONE's Balance Sheet?

The latest balance sheet data shows that SI-BONE had liabilities of US$16.7m due within a year, and liabilities of US$38.6m falling due after that. Offsetting this, it had US$114.4m in cash and US$15.4m in receivables that were due within 12 months. So it can boast US$74.5m more liquid assets than total liabilities.

This surplus suggests that SI-BONE has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, SI-BONE 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 SI-BONE'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, SI-BONE reported revenue of US$96m, which is a gain of 12%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is SI-BONE?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that SI-BONE had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of US$57m and booked a US$66m accounting loss. But the saving grace is the US$79.3m on the balance sheet. That means it could keep spending at its current rate for more than two years. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - SI-BONE has 3 warning signs we think you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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