Is SKYX Platforms (NASDAQ:SKYX) Using Too Much Debt?

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.' 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. We note that SKYX Platforms Corp. (NASDAQ:SKYX) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

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. If things get really bad, the lenders can take control of the business. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest 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 SKYX Platforms's Debt?

As you can see below, at the end of December 2024, SKYX Platforms had US$16.6m of debt, up from US$13.7m a year ago. Click the image for more detail. On the flip side, it has US$12.6m in cash leading to net debt of about US$3.99m.

How Healthy Is SKYX Platforms' Balance Sheet?

We can see from the most recent balance sheet that SKYX Platforms had liabilities of US$26.1m falling due within a year, and liabilities of US$30.7m due beyond that. On the other hand, it had cash of US$12.6m and US$2.42m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$41.8m.

This deficit isn't so bad because SKYX Platforms is worth US$143.1m, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if SKYX Platforms can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

See our latest analysis for SKYX Platforms

In the last year SKYX Platforms wasn't profitable at an EBIT level, but managed to grow its revenue by 47%, to US$86m. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Despite the top line growth, SKYX Platforms still had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable US$32m 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 US$19m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 2 warning signs with SKYX Platforms , and understanding them should be part of your investment process.

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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