Zevra Therapeutics (NASDAQ:ZVRA) Is Using Debt Safely

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that Zevra Therapeutics, Inc. (NASDAQ:ZVRA) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Zevra Therapeutics's Net Debt?

As you can see below, at the end of June 2025, Zevra Therapeutics had US$60.7m of debt, up from US$58.3m a year ago. Click the image for more detail. However, it does have US$202.6m in cash offsetting this, leading to net cash of US$141.9m.

How Healthy Is Zevra Therapeutics' Balance Sheet?

We can see from the most recent balance sheet that Zevra Therapeutics had liabilities of US$28.8m falling due within a year, and liabilities of US$110.2m due beyond that. Offsetting this, it had US$202.6m in cash and US$18.3m in receivables that were due within 12 months. So it actually has US$81.8m more liquid assets than total liabilities.

This short term liquidity is a sign that Zevra Therapeutics could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Zevra Therapeutics has more cash than debt is arguably a good indication that it can manage its debt safely. 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 Zevra Therapeutics'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.

Check out our latest analysis for Zevra Therapeutics

In the last year Zevra Therapeutics wasn't profitable at an EBIT level, but managed to grow its revenue by 162%, to US$62m. So its pretty obvious shareholders are hoping for more growth!

So How Risky Is Zevra Therapeutics?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that Zevra Therapeutics had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through US$47m of cash and made a loss of US$3.9m. While this does make the company a bit risky, it's important to remember it has net cash of US$141.9m. That means it could keep spending at its current rate for more than two years. The good news for shareholders is that Zevra Therapeutics has dazzling revenue growth, so there's a very good chance it can boost its free cash flow in the years to come. High growth pre-profit companies may well be risky, but they can also offer great rewards. When I consider a company to be a bit risky, I think it is responsible to check out whether insiders have been reporting any share sales. Luckily, you can click here ito see our graphic depicting Zevra Therapeutics insider transactions.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.