Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 can see that Pulmonx Corporation (NASDAQ:LUNG) does use debt in its business. But is this debt a concern to shareholders?

When Is Debt Dangerous?

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. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Pulmonx's Debt?

As you can see below, Pulmonx had US$37.1m of debt, at September 2025, which is about the same as the year before. You can click the chart for greater detail. However, it does have US$76.5m in cash offsetting this, leading to net cash of US$39.4m.

A Look At Pulmonx's Liabilities

The latest balance sheet data shows that Pulmonx had liabilities of US$22.9m due within a year, and liabilities of US$55.4m falling due after that. On the other hand, it had cash of US$76.5m and US$14.3m worth of receivables due within a year. So it actually has US$12.6m more liquid assets than total liabilities.

This surplus suggests that Pulmonx has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Pulmonx boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Pulmonx 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.

Over 12 months, Pulmonx reported revenue of US$92m, which is a gain of 16%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Pulmonx?

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 Pulmonx 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$33m and booked a US$57m accounting loss. But at least it has US$39.4m on the balance sheet to spend on growth, near-term. 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. We've identified 3 warning signs with Pulmonx , and understanding them should be part of your investment process.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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.