Would MeiraGTx Holdings (NASDAQ:MGTX) Be Better Off With Less Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that MeiraGTx Holdings plc (NASDAQ:MGTX) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

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. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, plenty of companies use debt to fund growth, without any negative consequences. 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 MeiraGTx Holdings Carry?

The chart below, which you can click on for greater detail, shows that MeiraGTx Holdings had US$73.5m in debt in March 2025; about the same as the year before. However, it does have US$66.5m in cash offsetting this, leading to net debt of about US$6.97m.

How Healthy Is MeiraGTx Holdings' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that MeiraGTx Holdings had liabilities of US$52.4m due within 12 months and liabilities of US$138.5m due beyond that. Offsetting this, it had US$66.5m in cash and US$5.23m in receivables that were due within 12 months. So its liabilities total US$119.2m more than the combination of its cash and short-term receivables.

Since publicly traded MeiraGTx Holdings shares are worth a total of US$603.5m, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Carrying virtually no net debt, MeiraGTx Holdings has a very light debt load indeed. 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 MeiraGTx Holdings 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.

See our latest analysis for MeiraGTx Holdings

In the last year MeiraGTx Holdings wasn't profitable at an EBIT level, but managed to grow its revenue by 203%, to US$35m. That's virtually the hole-in-one of revenue growth!

Caveat Emptor

Even though MeiraGTx Holdings managed to grow its top line quite deftly, the cold hard truth is that it is losing money on the EBIT line. Indeed, it lost a very considerable US$159m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled US$110m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 3 warning signs with MeiraGTx Holdings (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.