Is Voxtur Analytics (CVE:VXTR) Weighed On By Its Debt Load?

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.' 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. As with many other companies Voxtur Analytics Corp. (CVE:VXTR) makes use of debt. But the real question is whether this debt is making the company risky.

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

View our latest analysis for Voxtur Analytics

What Is Voxtur Analytics's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2023 Voxtur Analytics had CA$63.9m of debt, an increase on CA$61.2m, over one year. However, it does have CA$2.32m in cash offsetting this, leading to net debt of about CA$61.6m.

How Healthy Is Voxtur Analytics' Balance Sheet?

The latest balance sheet data shows that Voxtur Analytics had liabilities of CA$76.1m due within a year, and liabilities of CA$8.36m falling due after that. Offsetting these obligations, it had cash of CA$2.32m as well as receivables valued at CA$8.42m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by CA$73.7m.

This is a mountain of leverage relative to its market capitalization of CA$79.2m. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Voxtur Analytics's ability to maintain a healthy balance sheet going forward. 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, Voxtur Analytics made a loss at the EBIT level, and saw its revenue drop to CA$76m, which is a fall of 51%. That makes us nervous, to say the least.

Caveat Emptor

While Voxtur Analytics's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Its EBIT loss was a whopping CA$51m. 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$32m in negative free cash flow over the last twelve months. So in short it's a really risky stock. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For example Voxtur Analytics has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

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.