We Think Kadestone Capital (CVE:KDSX) Has A Fair Chunk Of Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Kadestone Capital Corp. (CVE:KDSX) makes use of debt. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Kadestone Capital's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Kadestone Capital had CA$11.0m of debt in June 2025, down from CA$16.6m, one year before. However, because it has a cash reserve of CA$2.93m, its net debt is less, at about CA$8.09m.

How Strong Is Kadestone Capital's Balance Sheet?

According to the last reported balance sheet, Kadestone Capital had liabilities of CA$1.84m due within 12 months, and liabilities of CA$10.0m due beyond 12 months. On the other hand, it had cash of CA$2.93m and CA$201.6k worth of receivables due within a year. So it has liabilities totalling CA$8.73m more than its cash and near-term receivables, combined.

Kadestone Capital has a market capitalization of CA$32.8m, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Kadestone Capital's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Kadestone Capital

It seems likely shareholders hope that Kadestone Capital can significantly advance the business plan before too long, because it doesn't have any significant revenue at the moment.

Caveat Emptor

Not only did Kadestone Capital's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Indeed, it lost a very considerable CA$5.0m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled CA$6.0m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 4 warning signs for Kadestone Capital you should be aware of, and 3 of them can't be ignored.

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.