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, PROCEPT BioRobotics Corporation (NASDAQ:PRCT) does carry debt. But is this debt a concern to shareholders?

What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does PROCEPT BioRobotics Carry?

As you can see below, PROCEPT BioRobotics had US$53.3m of debt, at June 2024, which is about the same as the year before. You can click the chart for greater detail. But it also has US$214.1m in cash to offset that, meaning it has US$160.7m net cash.

How Healthy Is PROCEPT BioRobotics' Balance Sheet?

We can see from the most recent balance sheet that PROCEPT BioRobotics had liabilities of US$42.8m falling due within a year, and liabilities of US$79.7m due beyond that. Offsetting this, it had US$214.1m in cash and US$58.9m in receivables that were due within 12 months. So it actually has US$150.4m more liquid assets than total liabilities.

This short term liquidity is a sign that PROCEPT BioRobotics could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that PROCEPT BioRobotics has more cash than debt is arguably a good indication that it can manage its debt safely. 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 PROCEPT BioRobotics'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 PROCEPT BioRobotics wasn't profitable at an EBIT level, but managed to grow its revenue by 74%, to US$177m. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is PROCEPT BioRobotics?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year PROCEPT BioRobotics had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of US$109m and booked a US$104m accounting loss. However, it has net cash of US$160.7m, so it has a bit of time before it will need more capital. PROCEPT BioRobotics's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Be aware that PROCEPT BioRobotics is showing 2 warning signs in our investment analysis , you should know about...

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.