Is Cohu (NASDAQ:COHU) Using Debt In A Risky Way?

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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that Cohu, Inc. (NASDAQ:COHU) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. 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 Cohu Carry?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 Cohu had US$17.8m of debt, an increase on US$10.5m, over one year. But on the other hand it also has US$198.2m in cash, leading to a US$180.3m net cash position.

How Healthy Is Cohu's Balance Sheet?

According to the last reported balance sheet, Cohu had liabilities of US$116.9m due within 12 months, and liabilities of US$73.3m due beyond 12 months. On the other hand, it had cash of US$198.2m and US$123.9m worth of receivables due within a year. So it can boast US$131.9m more liquid assets than total liabilities.

This short term liquidity is a sign that Cohu could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Cohu 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 Cohu'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 Cohu

Over 12 months, Cohu made a loss at the EBIT level, and saw its revenue drop to US$425m, which is a fall of 4.6%. That's not what we would hope to see.

So How Risky Is Cohu?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that Cohu had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of US$30m and booked a US$73m accounting loss. But the saving grace is the US$180.3m on the balance sheet. That means it could keep spending at its current rate for more than two years. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how Cohu's profit, revenue, and operating cashflow have changed over the last few years.

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.