Here's Why Humacyte (NASDAQ:HUMA) Can Afford Some Debt

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.' 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 Humacyte, Inc. (NASDAQ:HUMA) 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 frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Humacyte Carry?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Humacyte had US$68.8m of debt, an increase on US$60.3m, over one year. However, it also had US$38.0m in cash, and so its net debt is US$30.8m.

How Healthy Is Humacyte's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Humacyte had liabilities of US$21.1m due within 12 months and liabilities of US$113.7m due beyond that. Offsetting these obligations, it had cash of US$38.0m as well as receivables valued at US$394.0k due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$96.3m.

Humacyte has a market capitalization of US$242.3m, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Humacyte's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Check out our latest analysis for Humacyte

While it hasn't made a profit, at least Humacyte booked its first revenue as a publicly listed company, in the last twelve months.

Caveat Emptor

Over the last twelve months Humacyte produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable US$111m at the EBIT level. 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. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through US$106m of cash over the last year. So in short it's a really risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 4 warning signs for Humacyte (3 shouldn't be ignored!) that you should be aware of before investing here.

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.

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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.