Is STRATA Skin Sciences (NASDAQ:SSKN) Using Debt Sensibly?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 STRATA Skin Sciences, Inc. (NASDAQ:SSKN) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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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. If things get really bad, the lenders can take control of the business. 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, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does STRATA Skin Sciences Carry?

As you can see below, STRATA Skin Sciences had US$15.3m of debt, at September 2025, which is about the same as the year before. You can click the chart for greater detail. However, because it has a cash reserve of US$7.08m, its net debt is less, at about US$8.23m.

How Healthy Is STRATA Skin Sciences' Balance Sheet?

According to the last reported balance sheet, STRATA Skin Sciences had liabilities of US$15.0m due within 12 months, and liabilities of US$14.4m due beyond 12 months. On the other hand, it had cash of US$7.08m and US$3.50m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$18.8m.

The deficiency here weighs heavily on the US$7.65m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we'd watch its balance sheet closely, without a doubt. After all, STRATA Skin Sciences would likely require a major re-capitalisation if it had to pay its creditors today. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if STRATA Skin Sciences 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 STRATA Skin Sciences

Over 12 months, STRATA Skin Sciences made a loss at the EBIT level, and saw its revenue drop to US$31m, which is a fall of 5.2%. That's not what we would hope to see.

Caveat Emptor

Over the last twelve months STRATA Skin Sciences produced an earnings before interest and tax (EBIT) loss. Its EBIT loss was a whopping US$6.3m. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it burned through US$3.5m in negative free cash flow over the last year. So suffice it to say we consider the stock to be risky. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 4 warning signs for STRATA Skin Sciences (3 make us uncomfortable!) that you should be aware of before investing here.

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.

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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.