Is TechTarget (NASDAQ:TTGT) A Risky Investment?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 can see that TechTarget, Inc. (NASDAQ:TTGT) does use debt in its business. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is TechTarget's Net Debt?

The image below, which you can click on for greater detail, shows that TechTarget had debt of US$120.0m at the end of June 2025, a reduction from US$856.0m over a year. On the flip side, it has US$61.7m in cash leading to net debt of about US$58.3m.

How Strong Is TechTarget's Balance Sheet?

We can see from the most recent balance sheet that TechTarget had liabilities of US$175.1m falling due within a year, and liabilities of US$252.8m due beyond that. Offsetting these obligations, it had cash of US$61.7m as well as receivables valued at US$84.9m due within 12 months. So its liabilities total US$281.2m more than the combination of its cash and short-term receivables.

This is a mountain of leverage relative to its market capitalization of US$416.1m. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine TechTarget's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

View our latest analysis for TechTarget

In the last year TechTarget wasn't profitable at an EBIT level, but managed to grow its revenue by 51%, to US$387m. Shareholders probably have their fingers crossed that it can grow its way to profits.

Caveat Emptor

Despite the top line growth, TechTarget still had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost US$42m 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. However, it doesn't help that it burned through US$32m of cash over the last year. So suffice it to say we consider the stock very risky. 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. To that end, you should learn about the 3 warning signs we've spotted with TechTarget (including 1 which is potentially serious) .

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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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.