Does HubSpot (NYSE: HUBS) have a healthy track record?

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Berkshire Hathaway’s Charlie Munger-backed external fund manager Li Lu is quick to say this when he says “The biggest risk in investing is not price volatility, but if you will suffer a loss. permanent capital “. It’s only natural to consider a company’s balance sheet when looking at its level of risk, as debt is often involved when a business collapses. We note that HubSpot, Inc. (NYSE: HUBS) has debt on its balance sheet. But does this debt worry shareholders?

Why Does Debt Bring Risk?

Debt is a tool to help businesses grow, but if a business is unable to repay its lenders, then it exists at their mercy. Ultimately, if the company cannot meet its legal debt repayment obligations, shareholders could walk away with nothing. While it’s not too common, we often see indebted companies continually diluting their shareholders because lenders are forcing them to raise capital at a ridiculous price. By replacing dilution, however, debt can be a very good tool for companies 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 flow and debt together.

What is HubSpot’s debt?

As you can see below, HubSpot had $ 400.1 million in debt in September 2021, up from $ 474.0 million the year before. However, it has US $ 1.17 billion in cash offsetting this, which leads to a net cash position of US $ 770.6 million.

NYSE: HUBS Debt to Equity History December 7, 2021

How healthy is HubSpot’s track record?

The latest balance sheet data shows that HubSpot had liabilities of US $ 549.8 million due within one year and liabilities of US $ 683.7 million due thereafter. In return, he had $ 1.17 billion in cash and $ 126.7 million in receivables due within 12 months. He can therefore avail himself of $ 63.9 million in liquid assets more than total Liabilities.

This state of affairs indicates that HubSpot’s balance sheet looks quite strong, as its total liabilities roughly equal its liquid assets. So the $ 33.7 billion company is highly unlikely to run out of cash, but it’s still worth keeping an eye on the balance sheet. In short, HubSpot has net cash, so it’s fair to say that it doesn’t have a lot of debt! There is no doubt that we learn the most about debt from the balance sheet. But ultimately, the company’s future profitability will decide whether HubSpot can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free Analyst Profit Forecast report interesting.

Over the past year, HubSpot has not been profitable on an EBIT level, but has managed to grow its revenue by 45%, to $ 1.2 billion. Hopefully the business will be able to move towards profitability.

So how risky is HubSpot?

Although HubSpot recorded a loss of earnings before interest and taxes (EBIT) over the past twelve months, it generated positive free cash flow of US $ 146 million. So, although it is in deficit, it does not appear to have too much short-term balance sheet risk, given the net cash position. Keeping in mind the 45% growth in revenue over the past year, we think there’s a good chance the company is on the right track. There is no doubt that rapid growth in sales can cure all kinds of ailments, for one headline. When analyzing debt levels, the balance sheet is the obvious place to start. But at the end of the day, every business can contain risks that exist off the balance sheet. These risks can be difficult to spot. Every business has them, and we’ve spotted 4 warning signs for HubSpot (1 of which makes us a little uncomfortable!) to know.

If, after all of this, you’re more interested in a fast-growing company with a strong balance sheet, take a quick look at our list of cash-flow-growing stocks.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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