We Think Ultragenyx Pharmaceutical (NASDAQ:RARE) Has A Fair Chunk Of Debt

 Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. We note that Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

What Risk Does Debt Bring?

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. 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.

What Is Ultragenyx Pharmaceutical's Debt?

As you can see below, Ultragenyx Pharmaceutical had US$891.4m of debt, at March 2024, which is about the same as the year before. You can click the chart for greater detail. However, because it has a cash reserve of US$412.1m, its net debt is less, at about US$479.3m.

How Healthy Is Ultragenyx Pharmaceutical's Balance Sheet?

We can see from the most recent balance sheet that Ultragenyx Pharmaceutical had liabilities of US$245.6m falling due within a year, and liabilities of US$921.2m due beyond that. Offsetting these obligations, it had cash of US$412.1m as well as receivables valued at US$100.5m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$654.3m.

Given Ultragenyx Pharmaceutical has a market capitalization of US$3.41b, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. 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 Ultragenyx Pharmaceutical'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.

Over 12 months, Ultragenyx Pharmaceutical reported revenue of US$443m, which is a gain of 15%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.