Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, REGENXBIO Inc. (NASDAQ:RGNX) does carry debt. But the real question is whether this debt is making the company risky.

What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does REGENXBIO Carry?

You can click the graphic below for the historical numbers, but it shows that REGENXBIO had US$73.2m of debt in June 2024, down from US$116.3m, one year before. But on the other hand it also has US$290.4m in cash, leading to a US$217.2m net cash position.

A Look At REGENXBIO's Liabilities

According to the last reported balance sheet, REGENXBIO had liabilities of US$98.3m due within 12 months, and liabilities of US$122.8m due beyond 12 months. Offsetting these obligations, it had cash of US$290.4m as well as receivables valued at US$45.1m due within 12 months. So it can boast US$114.4m more liquid assets than total liabilities.

This surplus suggests that REGENXBIO is using debt in a way that is appears to be both safe and conservative. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, REGENXBIO 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 REGENXBIO can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Over 12 months, REGENXBIO made a loss at the EBIT level, and saw its revenue drop to US$89m, which is a fall of 8.2%. We would much prefer see growth.

So How Risky Is REGENXBIO?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that REGENXBIO had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through US$195m of cash and made a loss of US$241m. But at least it has US$217.2m on the balance sheet to spend on growth, near-term. 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. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 3 warning signs with REGENXBIO (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

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.