“Volatility is not a risk we care about. What we care about is avoiding a permanent loss of capital. Debt arises when a business collapses,” said David Iben. Often, it makes sense to consider a company’s balance sheet when considering the degree of risk. We can see it. Quotient Technology Inc. (NYSE: QUOT) uses debt in its business. But do shareholders need to worry about the use of debt?
When is debt dangerous?
Generally speaking, debt becomes a real problem only if the company raises capital or cannot easily repay it with its own cash flow. Part of capitalism is the process of “creative destruction” in which a failed business is mercilessly liquidated by a banker. It’s less common, but we often see debt companies permanently dilute shareholders, as lenders force them to raise capital at distressed prices. That said, the most common situation is when a company manages its debt reasonably well-and for its own benefit. The first thing to do when considering the amount of debt a company uses is to look at cash and debt together.
See the latest analysis of Quotient Technology
What is Quotient Technology’s Net Debt?
Click the image below to see more details, but in March 2022 Quotient Technology’s debt increased from $ 180 million a year to $ 199.4 million. However, the cash to offset this is $ 202.6 million and the net cash is $ 3.21 million.
Overview of Quotient Technology’s Responsibilities
Expanding the latest balance sheet data, we can see that Quotient Technology’s debt is $ 299.4 million within 12 months and $ 28 million thereafter. To offset this, cash due within 12 months was $ 202.6 million and accounts receivable were $ 114.3 million. Therefore, its liabilities exceed US $ 10.5 million in cash and (short-term) accounts receivable.
Given that Quotient Technology has a market capitalization of US $ 280.9 million, it is hard to believe that these debts pose many threats. That said, it’s clear that we need to continue to monitor our balance sheets so they don’t get worse. There are some notable debt, but Quotient Technology has more cash than debt, so I’m confident that it’s safe to manage. When analyzing debt levels, the balance sheet is a clear place to start. But it is, above all, future earnings that determine Quotient Technology’s ability to maintain a healthy balance sheet in the future. Therefore, if you want to know what the experts think, you may find this free report on analysts’ profit forecasts interesting.
Last year, Quotient Technology wasn’t profitable at the EBIT level, but was able to grow its revenue by 4.8% to US $ 485 million. We usually want to see faster growth from unprofitable companies, but each one is unique.
So how risky is Quotient Technology?
Statistically, companies that lose money are at higher risk than companies that make money. Quotient Technology also posted earnings before interest and tax (EBIT) losses last year. Also, during the same period, there was a negative net cash outflow of $ 25 million, with an accounting loss of $ 58 million. Net cash is only US $ 3.21 million, so if you don’t reach the break-even point, you may need to raise more capital. In summary, we are a bit skeptical of this, as this seems to be quite dangerous in the absence of free cash flow. For high-risk companies like Quotient Technology, I always want to monitor insiders for buying and selling. So if you want to find out for yourself, click here.
After all, if you’re more interested in a fast-growing company with a solid balance sheet, check out our list of net cash growth stocks without delay.
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This article by Simply Wall St is by nature general. Based on historical data and analysts’ predictions, we provide commentary using only unbiased methodologies. Our articles are not intended to provide financial advice. It does not endorse the buying or selling of shares, nor does it take into account your purpose or financial position. We aim to provide long-term, focused analysis based on basic data. Please note that our analysis may not take into account the latest price-sensitive company announcements and qualitative material. Simply Wall Street does not have a position in any of the listed stocks.
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