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

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

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="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?” 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.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content=" 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.

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debt-equity-history-analysis

How Strong Is Inovio Pharmaceuticals’s Balance Sheet?

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The latest balance sheet data shows that Inovio Pharmaceuticals had liabilities of US$38.0m due within a year, and liabilities of US$218.8m falling due after that. On the other hand, it had cash of US$371.7m and US$4.00m worth of receivables due within a year. So it actually has US$118.8m more liquid assets than total liabilities.” data-reactid=”51″>The latest balance sheet data shows that Inovio Pharmaceuticals had liabilities of US$38.0m due within a year, and liabilities of US$218.8m falling due after that. On the other hand, it had cash of US$371.7m and US$4.00m worth of receivables due within a year. So it actually has US$118.8m more liquid assets than total liabilities.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="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.” 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?

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="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.” 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.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.” data-reactid=”60″>If, after all that, you’re more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.” data-reactid=”61″>This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

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