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We Think Pacific Biosciences of California (NASDAQ:PACB) Has A Fair Chunk Of Debt

Simply Wall St · 5d ago

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Pacific Biosciences of California, Inc. (NASDAQ:PACB) does have debt on its balance sheet. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Pacific Biosciences of California's Debt?

As you can see below, Pacific Biosciences of California had US$648.2m of debt at September 2025, down from US$893.1m a year prior. However, because it has a cash reserve of US$298.7m, its net debt is less, at about US$349.5m.

debt-equity-history-analysis
NasdaqGS:PACB Debt to Equity History January 6th 2026

How Healthy Is Pacific Biosciences of California's Balance Sheet?

We can see from the most recent balance sheet that Pacific Biosciences of California had liabilities of US$63.2m falling due within a year, and liabilities of US$703.9m due beyond that. Offsetting this, it had US$298.7m in cash and US$30.6m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$437.8m.

This is a mountain of leverage relative to its market capitalization of US$597.8m. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. 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 Pacific Biosciences of California 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.

Check out our latest analysis for Pacific Biosciences of California

Over 12 months, Pacific Biosciences of California made a loss at the EBIT level, and saw its revenue drop to US$155m, which is a fall of 11%. We would much prefer see growth.

Caveat Emptor

While Pacific Biosciences of California's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Its EBIT loss was a whopping US$581m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled US$131m 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. To that end, you should be aware of the 2 warning signs we've spotted with Pacific Biosciences of California .

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.