Would Voxtur Analytics (CVE:VXTR) Be Better Off With Less Debt?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. We note that Voxtur Analytics Corp. (CVE:VXTR) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

When Is Debt Dangerous?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for Voxtur Analytics

What Is Voxtur Analytics's Debt?

As you can see below, at the end of December 2021, Voxtur Analytics had CA$26.2m of debt, up from CA$12.8m a year ago. Click the image for more detail. However, because it has a cash reserve of CA$18.7m, its net debt is less, at about CA$7.51m.

A Look At Voxtur Analytics' Liabilities

We can see from the most recent balance sheet that Voxtur Analytics had liabilities of CA$24.2m falling due within a year, and liabilities of CA$53.0m due beyond that. Offsetting these obligations, it had cash of CA$18.7m as well as receivables valued at CA$25.4m due within 12 months. So its liabilities total CA$33.1m more than the combination of its cash and short-term receivables.

Since publicly traded Voxtur Analytics shares are worth a total of CA$613.6m, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. But either way, Voxtur Analytics has virtually no net debt, 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 ultimately the future profitability of the business will decide if Voxtur Analytics 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 Voxtur Analytics wasn't profitable at an EBIT level, but managed to grow its revenue by 368%, to CA$96m. When it comes to revenue growth, that's like nailing the game winning 3-pointer!

Caveat Emptor

Despite the top line growth, Voxtur Analytics still had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost CA$31m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through CA$19m of cash over the last year. So to be blunt we think it is risky. 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. Case in point: We've spotted 6 warning signs for Voxtur Analytics you should be aware of, and 2 of them make us uncomfortable.

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.