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.' 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 can see that Cryoport, Inc. (NASDAQ:CYRX) does use debt in its business. But is this debt a concern to shareholders?
When Is Debt Dangerous?
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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.
View our latest analysis for Cryoport
How Much Debt Does Cryoport Carry?
The chart below, which you can click on for greater detail, shows that Cryoport had US$408.4m in debt in June 2023; about the same as the year before. However, its balance sheet shows it holds US$504.7m in cash, so it actually has US$96.3m net cash.
How Strong Is Cryoport's Balance Sheet?
Zooming in on the latest balance sheet data, we can see that Cryoport had liabilities of US$40.3m due within 12 months and liabilities of US$446.1m due beyond that. Offsetting this, it had US$504.7m in cash and US$43.1m in receivables that were due within 12 months. So it can boast US$61.4m more liquid assets than total liabilities.
This short term liquidity is a sign that Cryoport could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Cryoport boasts net cash, so it's fair to say it does not have a heavy debt load! 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 Cryoport 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.
In the last year Cryoport wasn't profitable at an EBIT level, but managed to grow its revenue by 4.8%, to US$241m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.
So How Risky Is Cryoport?
Statistically speaking companies that lose money are riskier than those that make money. And we do note that Cryoport 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$32m and booked a US$47m accounting loss. But the saving grace is the US$96.3m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. 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. 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. Case in point: We've spotted 1 warning sign for Cryoport you should be aware of.
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.