David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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. Importantly, BioLife Solutions, Inc. (NASDAQ:BLFS) does carry debt. But the real question is whether this debt is making the company risky.

When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does BioLife Solutions Carry?

As you can see below, BioLife Solutions had US$21.1m of debt at June 2024, down from US$25.5m a year prior. But on the other hand it also has US$34.1m in cash, leading to a US$13.1m net cash position.

How Strong Is BioLife Solutions' Balance Sheet?

According to the last reported balance sheet, BioLife Solutions had liabilities of US$30.8m due within 12 months, and liabilities of US$22.7m due beyond 12 months. Offsetting these obligations, it had cash of US$34.1m as well as receivables valued at US$18.1m due within 12 months. So its liabilities total US$1.34m more than the combination of its cash and short-term receivables.

Having regard to BioLife Solutions' size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the US$1.17b company is short on cash, but still worth keeping an eye on the balance sheet. Despite its noteworthy liabilities, BioLife Solutions boasts net cash, so it's fair to say it does not have a heavy debt load! 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 BioLife Solutions can strengthen its balance sheet over time. 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, BioLife Solutions made a loss at the EBIT level, and saw its revenue drop to US$140m, which is a fall of 2.4%. That's not what we would hope to see.

So How Risky Is BioLife Solutions?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that BioLife Solutions 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$7.8m and booked a US$64m accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of US$13.1m. That means it could keep spending at its current rate for more than two years. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. There's no doubt that we learn most about debt from the balance sheet. 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 1 warning sign for BioLife Solutions 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.

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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.