Is Cryoport (NASDAQ:CYRX) Using Debt In A Risky Way?

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.' 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 can see that Cryoport, Inc. (NASDAQ:CYRX) does use debt in its business. But should shareholders be worried about its use of debt?

What Risk Does Debt Bring?

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. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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. When we think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for Cryoport

How Much Debt Does Cryoport Carry?

The image below, which you can click on for greater detail, shows that at June 2022 Cryoport had debt of US$406.9m, up from US$116.3m in one year. But it also has US$550.6m in cash to offset that, meaning it has US$143.7m net cash.

How Healthy Is Cryoport's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Cryoport had liabilities of US$44.0m due within 12 months and liabilities of US$433.9m due beyond that. Offsetting this, it had US$550.6m in cash and US$43.9m in receivables that were due within 12 months. So it actually has US$116.6m more liquid assets than total liabilities.

This short term liquidity is a sign that Cryoport could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Cryoport has more cash than debt is arguably a good indication that 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 Cryoport 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.

In the last year Cryoport wasn't profitable at an EBIT level, but managed to grow its revenue by 36%, to US$230m. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is Cryoport?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Cryoport had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$23m of cash and made a loss of US$297m. But the saving grace is the US$143.7m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Cryoport's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - Cryoport has 3 warning signs we think you should be aware of.

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.