Does Inovio Pharmaceuticals (NASDAQ:INO) Have A Healthy Balance Sheet?

NASDAQ:INO) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?” data-reactid=”28″>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.’ It’s only natural to consider a company’s balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that Inovio Pharmaceuticals, Inc. (NASDAQ:INO) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can’t easily pay it off, either by raising capital or with its own cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for Inovio Pharmaceuticals ” data-reactid=”31″> View our latest analysis for Inovio Pharmaceuticals

How Much Debt Does Inovio Pharmaceuticals Carry?

You can click the graphic below for the historical numbers, but it shows that as of June 2020 Inovio Pharmaceuticals had US$79.6m of debt, an increase on US$62.8m, over one year. However, its balance sheet shows it holds US$371.7m in cash, so it actually has US$292.1m net cash.

More

How Strong Is Inovio Pharmaceuticals’s Balance Sheet?

this free report on analyst profit forecasts to be interesting.” data-reactid=”52″>This short term liquidity is a sign that Inovio Pharmaceuticals could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Inovio Pharmaceuticals has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Inovio Pharmaceuticals 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.

In the last year Inovio Pharmaceuticals had a loss before interest and tax, and actually shrunk its revenue by 63%, to US$2.7m. That makes us nervous, to say the least.

So How Risky Is Inovio Pharmaceuticals?

4 warning signs for Inovio Pharmaceuticals (1 doesn’t sit too well with us) you should be aware of.” data-reactid=”55″>Statistically speaking companies that lose money are riskier than those that make money. And in the last year Inovio Pharmaceuticals had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$94.5m of cash and made a loss of US$222.0m. But the saving grace is the US$292.1m 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. 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. For instance, we’ve identified 4 warning signs for Inovio Pharmaceuticals (1 doesn’t sit too well with us) you should be aware of.