Funding activities

Bone Therapeutics (EBR: BOTHE) has good debt

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett said “volatility is far from synonymous with risk.” It’s natural to consider a company’s balance sheet when looking at its riskiness, as debt is often involved when a company fails. We can see that Bone Therapeutics SA (EBR: BOTH) uses debt in his business. But does this debt worry shareholders?

When is debt dangerous?

Debt is a tool to help businesses grow, but if a business is unable to repay its lenders, it exists at their mercy. If things go really bad, lenders can take over the business. Although not too common, we often see companies in debt permanently diluting their shareholders because lenders force them to raise capital at a ridiculous price. Of course, debt can be an important tool in businesses, especially capital-intensive businesses. When we think about a company’s use of debt, we first look at cash and debt together.

See our latest review for Bone Therapeutics

How much debt does Bone Therapeutics have?

As you can see below, at the end of June 2019, Bone Therapeutics had a debt of 15.6 million euros, compared to 13.4 million euros a year ago. Click on the image for more details. On the other hand, he has €13.2 million in cash, resulting in a net debt of around €2.42 million.

ENXTBR:BOTHE Historical Debt, November 15, 2019

ENXTBR:BOTHE Historical Debt, November 15, 2019

How healthy is Bone Therapeutics’ balance sheet?

We can see from the most recent balance sheet that Bone Therapeutics had liabilities of €9.23 million due in one year and liabilities of €12.8 million due beyond. In return, it had €13.2 million in cash and €4.03 million in receivables due within 12 months. It therefore has liabilities totaling 4.79 million euros more than its cash and short-term receivables, combined.

Of course, Bone Therapeutics has a market capitalization of 39.0 million, so those liabilities are probably manageable. However, we think it’s worth keeping an eye on the strength of its balance sheet, as it can change over time. There is no doubt that we learn the most about debt from the balance sheet. But ultimately, the company’s future profitability will decide whether Bone Therapeutics can strengthen its balance sheet over time. So if you want to see what the pros think, you might find this free analyst earnings forecast report Be interesting.

Last year, Bone Therapeutics was not profitable in terms of EBIT, but managed to increase its turnover by 50%, to 2.4 million euros. With a little luck, the company will be able to progress towards profitability.

Caveat Emptor

Despite revenue growth, Bone Therapeutics still posted negative earnings before interest and taxes (EBIT) over the past year. Indeed, it lost a very considerable 13 million euros in terms of EBIT. When we look at this and recall the liabilities on its balance sheet, versus cash, it seems unwise to us that the company has liabilities. So we think its balance sheet is a little stretched, but not beyond repair. However, it doesn’t help that he burned €11m in cash in the last year. In short, it’s a really risky title. When looking at a riskier business, we like to check how its profits (or losses) have changed over time. Today we provide readers with this interactive graphic showing how Bone Therapeutics earnings, revenue and operating cash flow have changed over the past few years.

In the end, sometimes it’s easier to focus on companies that don’t even need to take on debt. Readers can access a list of growth stocks with no net debt 100% freeright now.

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