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 XpresSpa Group, Inc. (NASDAQ:XSPA) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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.

View our latest analysis for XpresSpa Group

What Is XpresSpa Group's Debt?

The image below, which you can click on for greater detail, shows that XpresSpa Group had debt of US$5.65m at the end of June 2021, a reduction from US$6.23m over a year. But on the other hand it also has US$102.5m in cash, leading to a US$96.8m net cash position.

A Look At XpresSpa Group's Liabilities

The latest balance sheet data shows that XpresSpa Group had liabilities of US$20.3m due within a year, and liabilities of US$6.10m falling due after that. On the other hand, it had cash of US$102.5m and US$1.22m worth of receivables due within a year. So it actually has US$77.3m more liquid assets than total liabilities.

This surplus liquidity suggests that XpresSpa Group's balance sheet could take a hit just as well as Homer Simpson's head can take a punch. On this view, lenders should feel as safe as the beloved of a black-belt karate master. Succinctly put, XpresSpa Group boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if XpresSpa Group 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 XpresSpa Group had a loss before interest and tax, and actually shrunk its revenue by 40%, to US$18m. That makes us nervous, to say the least.