Does VBI Vaccines (NASDAQ:VBIV) Have A Healthy Balance Sheet?

NASDAQ:VBIV) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?” data-reactid=”28″>Warren Buffett famously said, ‘Volatility is far from synonymous with risk.’ So it seems the smart money knows that debt – which is usually involved in bankruptcies – is a very important factor, when you assess how risky a company is. We note that VBI Vaccines Inc. (NASDAQ:VBIV) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

When Is Debt A Problem?

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. 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, 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 VBI Vaccines ” data-reactid=”31″> See our latest analysis for VBI Vaccines

What Is VBI Vaccines’s Net Debt?

The image below, which you can click on for greater detail, shows that at June 2020 VBI Vaccines had debt of US$15.4m, up from US$14.4m in one year. But it also has US$86.1m in cash to offset that, meaning it has US$70.7m net cash.

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A Look At VBI Vaccines’s Liabilities

this free report on analyst profit forecasts to be interesting.” data-reactid=”52″>This surplus suggests that VBI Vaccines has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, VBI Vaccines 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 it is future earnings, more than anything, that will determine VBI Vaccines’s ability to maintain a healthy balance sheet going forward. 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 VBI Vaccines had a loss before interest and tax, and actually shrunk its revenue by 54%, to US$1.8m. That makes us nervous, to say the least.

So How Risky Is VBI Vaccines?

4 warning signs for VBI Vaccines (1 can’t be ignored) you should be aware of.” data-reactid=”55″>Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months VBI Vaccines lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$38.9m and booked a US$44.9m accounting loss. Given it only has net cash of US$70.7m, the company may need to raise more capital if it doesn’t reach break-even soon. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn’t produce free cash flow regularly. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we’ve identified 4 warning signs for VBI Vaccines (1 can’t be ignored) you should be aware of.