Cantargia (STO:CANTA) Has Debt But No Earnings; Should You Worry?

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 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. We note that Cantargia AB (publ) (STO:CANTA) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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 Cantargia's Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Cantargia had debt of kr22.4m, up from none in one year. However, it does have kr81.9m in cash offsetting this, leading to net cash of kr59.5m.

How Strong Is Cantargia's Balance Sheet?

We can see from the most recent balance sheet that Cantargia had liabilities of kr61.8m falling due within a year, and liabilities of kr84.0k due beyond that. On the other hand, it had cash of kr81.9m and kr1.63m worth of receivables due within a year. So it can boast kr21.7m more liquid assets than total liabilities.

This short term liquidity is a sign that Cantargia could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Cantargia has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Cantargia's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

See our latest analysis for Cantargia

Since Cantargia doesn't have significant operating revenue, shareholders may be hoping it comes up with a great new product, before it runs out of money.

So How Risky Is Cantargia?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year Cantargia had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of kr149m and booked a kr168m accounting loss. With only kr59.5m on the balance sheet, it would appear that its going to need to raise capital again soon. 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. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. We've identified 7 warning signs with Cantargia (at least 4 which are concerning) , and understanding them should be part of your investment process.

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.