Cy4gate (BIT:CY4) Has Debt But No Earnings; Should You Worry?

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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. As with many other companies Cy4gate S.p.A. (BIT:CY4) makes use of debt. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Cy4gate's Debt?

The image below, which you can click on for greater detail, shows that Cy4gate had debt of €5.11m at the end of September 2025, a reduction from €43.1m over a year. But on the other hand it also has €90.0m in cash, leading to a €84.9m net cash position.

A Look At Cy4gate's Liabilities

According to the last reported balance sheet, Cy4gate had liabilities of €116.2m due within 12 months, and liabilities of €49.7m due beyond 12 months. Offsetting this, it had €90.0m in cash and €51.6m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €24.2m.

Since publicly traded Cy4gate shares are worth a total of €189.1m, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. While it does have liabilities worth noting, Cy4gate also has more cash than debt, so we're pretty confident it can manage its debt safely. 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 Cy4gate 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.

See our latest analysis for Cy4gate

In the last year Cy4gate wasn't profitable at an EBIT level, but managed to grow its revenue by 32%, to €93m. With any luck the company will be able to grow its way to profitability.

So How Risky Is Cy4gate?

Although Cy4gate had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of €2.3m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. The good news for Cy4gate shareholders is that its revenue growth is strong, making it easier to raise capital if need be. But that doesn't change our opinion that the stock 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. For example - Cy4gate has 1 warning sign we think you should be aware of.

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.

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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.