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.' 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 Lantheus Holdings, Inc. (NASDAQ:LNTH) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

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. 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. When we think about a company's use of debt, we first look at cash and debt together.

What Is Lantheus Holdings's Net Debt?

The chart below, which you can click on for greater detail, shows that Lantheus Holdings had US$565.5m in debt in March 2025; about the same as the year before. However, its balance sheet shows it holds US$938.5m in cash, so it actually has US$373.0m net cash.

How Healthy Is Lantheus Holdings' Balance Sheet?

The latest balance sheet data shows that Lantheus Holdings had liabilities of US$248.0m due within a year, and liabilities of US$643.0m falling due after that. Offsetting these obligations, it had cash of US$938.5m as well as receivables valued at US$348.7m due within 12 months. So it can boast US$396.3m more liquid assets than total liabilities.

This surplus suggests that Lantheus Holdings has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Lantheus Holdings has more cash than debt is arguably a good indication that it can manage its debt safely.

See our latest analysis for Lantheus Holdings

On the other hand, Lantheus Holdings saw its EBIT drop by 4.0% in the last twelve months. If earnings continue to decline at that rate the company may have increasing difficulty managing its 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 Lantheus Holdings can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Lantheus Holdings has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the most recent three years, Lantheus Holdings recorded free cash flow worth 70% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While it is always sensible to investigate a company's debt, in this case Lantheus Holdings has US$373.0m in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of US$392m, being 70% of its EBIT. So is Lantheus Holdings's debt a risk? It doesn't seem so to us. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 2 warning signs for Lantheus Holdings that you should be aware of.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.