Yahoo Finance Is ImmuCell (NASDAQ:ICCC) Weighed On By Its Debt Load?
The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. As with many other companies ImmuCell Corporation (NASDAQ:ICCC) makes use of debt. But the more important question is: how much risk is that debt creating?
When Is Debt A Problem?
Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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, 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. When we examine debt levels, we first consider both cash and debt levels, together.
See our latest analysis for ImmuCell
How Much Debt Does ImmuCell Carry?
You can click the graphic below for the historical numbers, but it shows that ImmuCell had US$9.12m of debt in June 2021, down from US$9.86m, one year before. However, it does have US$10.7m in cash offsetting this, leading to net cash of US$1.58m.
A Look At ImmuCell's Liabilities
Zooming in on the latest balance sheet data, we can see that ImmuCell had liabilities of US$2.03m due within 12 months and liabilities of US$9.43m due beyond that. On the other hand, it had cash of US$10.7m and US$2.06m worth of receivables due within a year. So it actually has US$1.30m more liquid assets than total liabilities.
Having regard to ImmuCell's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the US$70.5m company is struggling for cash, we still think it's worth monitoring its balance sheet. Succinctly put, ImmuCell boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since ImmuCell will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.
Over 12 months, ImmuCell reported revenue of US$16m, which is a gain of 11%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.
So How Risky Is ImmuCell?
By their very nature companies that are losing money are more risky than those with a long history of profitability. And in the last year ImmuCell had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$3.4m of cash and made a loss of US$434k. But the saving grace is the US$1.58m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. 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. 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 ImmuCell (of which 1 doesn't sit too well with us!) 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.
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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