Health Check: How Prudently Does InnovAge Holding (NASDAQ:INNV) Use 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 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. Importantly, InnovAge Holding Corp. (NASDAQ:INNV) does carry debt. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is InnovAge Holding's Net Debt?

The image below, which you can click on for greater detail, shows that InnovAge Holding had debt of US$62.7m at the end of March 2025, a reduction from US$66.1m over a year. However, its balance sheet shows it holds US$101.7m in cash, so it actually has US$39.0m net cash.

How Strong Is InnovAge Holding's Balance Sheet?

According to the last reported balance sheet, InnovAge Holding had liabilities of US$225.3m due within 12 months, and liabilities of US$43.6m due beyond 12 months. Offsetting this, it had US$101.7m in cash and US$47.7m in receivables that were due within 12 months. So its liabilities total US$119.5m more than the combination of its cash and short-term receivables.

Given InnovAge Holding has a market capitalization of US$602.4m, 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. While it does have liabilities worth noting, InnovAge Holding also has more cash than debt, so we're pretty confident it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine InnovAge Holding's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

See our latest analysis for InnovAge Holding

In the last year InnovAge Holding wasn't profitable at an EBIT level, but managed to grow its revenue by 12%, to US$832m. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is InnovAge Holding?

While InnovAge Holding lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$16m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. Until we see some positive EBIT, we're a bit cautious of the stock, not least because of the rather modest revenue growth. For riskier companies like InnovAge Holding I always like to keep an eye on whether insiders are buying or selling. So click here if you want to find out for yourself.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.