Is Alpha Tau Medical (NASDAQ:DRTS) 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.' 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. Importantly, Alpha Tau Medical Ltd. (NASDAQ:DRTS) does carry debt. But should shareholders be worried about its use of debt?

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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. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Alpha Tau Medical's Net Debt?

As you can see below, at the end of September 2025, Alpha Tau Medical had US$6.15m of debt, up from US$5.48m a year ago. Click the image for more detail. But on the other hand it also has US$72.2m in cash, leading to a US$66.1m net cash position.

A Look At Alpha Tau Medical's Liabilities

Zooming in on the latest balance sheet data, we can see that Alpha Tau Medical had liabilities of US$9.14m due within 12 months and liabilities of US$18.0m due beyond that. Offsetting these obligations, it had cash of US$72.2m as well as receivables valued at US$332.0k due within 12 months. So it can boast US$45.4m more liquid assets than total liabilities.

This surplus suggests that Alpha Tau Medical has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Alpha Tau Medical boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Alpha Tau Medical'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.

View our latest analysis for Alpha Tau Medical

Given its lack of meaningful operating revenue, Alpha Tau Medical shareholders no doubt hope it can fund itself until it can sell some of its new medical technology.

So How Risky Is Alpha Tau Medical?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months Alpha Tau Medical lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$27m and booked a US$40m accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of US$66.1m. That means it could keep spending at its current rate for more than two years. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 3 warning signs for Alpha Tau Medical (2 are a bit concerning) 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.

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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.