David Iben once said, “Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.” Makes sense, right? When you’re eyeing up a company, you gotta consider its balance sheet. Why? Because debt is often what drags businesses down. Now, let’s talk about Puma Biotechnology, Inc. (NASDAQ:PBYI). They’ve got some debt. The question is—how worried should the shareholders be?
Contents
What is Puma Biotechnology’s Debt?
Take a look: Puma Biotechnology had US$89.1m in debt as of June 2024, which is down from US$99.0m the previous year. They’ve got US$96.8m in cash, though, leaving them with a net cash of US$7.77m.
A Look At Puma Biotechnology’s Liabilities
From their latest balance sheet, Puma Biotechnology had liabilities of US$104.3m due within a year, and US$52.2m due beyond that. Add to that US$96.8m in cash and US$28.1m in receivables due within 12 months. So, they’re looking at total liabilities that are US$31.6m more than their combined cash and near-term receivables.
With a market cap of US$110.4m, they could potentially raise cash to improve their balance sheet, if necessary. It also seems they have more cash than debt, which eases some worries.
When Is Debt A Problem?
Debt becomes a headache when a company struggles to pay it off, either from its own cash flow or by raising capital. Worst case? Bankruptcy. More often, a company might issue shares at rock-bottom prices just to stay afloat, diluting shareholders in the process. Not pretty, right? But debt can also be a useful tool, particularly for capital-heavy businesses. First thing’s first: assess a company’s cash and debt together.
See our latest analysis for Puma Biotechnology.
Summing Up
So here’s the deal: while Puma’s balance sheet isn’t fabulous due to all those liabilities, it’s a plus they’ve got US$7.77m in net cash. Despite this, we’re not entirely comfortable with their declining EBIT, which could make paying off debt trickier.
Interpreting Debt and Future Earnings
Shareholders, heads up. Puma Biotechnology’s EBIT dropped by 27% last year. If that trend continues, paying off debt could be quite the challenge. Balance sheets matter, but future earnings are crucial for maintaining financial health. Interested in future prospects? Check out this free report to see analyst profit forecasts.
Remember, businesses need free cash flow to pay off debt—accounting profits alone won’t cut it. Puma’s free cash flow is 16% of its EBIT over the last three years, which is pretty low. This weak cash conversion hampers their ability to manage debt efficiently.
Key Takeaways
- Debt Levels: Puma Biotechnology’s debt stands at US$89.1m with US$96.8m cash.
- Liabilities and Assets: They have liabilities totaling US$156.5m, with US$124.9m in assets.
- Profitability: Their EBIT has declined by 27% recently, raising concerns.
More Resources
Of course, analyzing debt is essential, but each company has risks beyond the balance sheet. For instance, we’ve uncovered 4 warning signs for Puma Biotechnology (1 is a bit unpleasant!) to check out before you invest.
Prefer stocks without debt? Discover our exclusive list of net cash growth stocks.
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This article by Simply Wall St is general in nature with commentary based on historical data and analyst forecasts. It’s not financial advice, nor does it recommend buying or selling stocks. Consider your financial situation and objectives before investing. We aim for long-term focused analysis driven by fundamental data. Note, our insights might not include the latest price-sensitive updates or qualitative material. Simply Wall St has no stake in any stocks mentioned.
