Warren Buffett famously said, '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. As with many other companies XpresSpa Group, Inc. (NASDAQ:XSPA) makes use of debt. But the more important question is: how much risk is that debt creating?

Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

View our latest analysis for XpresSpa Group

What Is XpresSpa Group's Debt?

As you can see below, XpresSpa Group had US$5.65m of debt, at September 2021, which is about the same as the year before. You can click the chart for greater detail. But it also has US$109.2m in cash to offset that, meaning it has US$103.5m net cash.

A Look At XpresSpa Group's Liabilities

According to the last reported balance sheet, XpresSpa Group had liabilities of US$17.2m due within 12 months, and liabilities of US$8.16m due beyond 12 months. On the other hand, it had cash of US$109.2m and US$64.0k worth of receivables due within a year. So it actually has US$83.9m more liquid assets than total liabilities.

This surplus strongly suggests that XpresSpa Group has a rock-solid balance sheet (and the debt is of no concern whatsoever). Having regard to this fact, we think its balance sheet is as strong as an ox. Simply put, the fact that XpresSpa Group has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. 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.

Over 12 months, XpresSpa Group reported revenue of US$45m, which is a gain of 152%, although it did not report any earnings before interest and tax. So its pretty obvious shareholders are hoping for more growth!