Is Cytek Biosciences (NASDAQ:CTKB) Using Debt Sensibly?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Cytek Biosciences, Inc. (NASDAQ:CTKB) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

What Risk Does Debt Bring?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

See our latest analysis for Cytek Biosciences

What Is Cytek Biosciences's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2024 Cytek Biosciences had US$3.42m of debt, an increase on US$2.72m, over one year. But on the other hand it also has US$270.1m in cash, leading to a US$266.7m net cash position.

How Healthy Is Cytek Biosciences' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Cytek Biosciences had liabilities of US$55.6m due within 12 months and liabilities of US$43.9m due beyond that. Offsetting these obligations, it had cash of US$270.1m as well as receivables valued at US$50.4m due within 12 months. So it actually has US$221.0m more liquid assets than total liabilities.

This surplus strongly suggests that Cytek Biosciences has a rock-solid balance sheet (and the debt is of no concern whatsoever). With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Succinctly put, Cytek Biosciences boasts net cash, so it's fair to say it does not have a heavy debt load! 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 Cytek Biosciences 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 Cytek Biosciences wasn't profitable at an EBIT level, but managed to grow its revenue by 21%, to US$201m. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is Cytek Biosciences?

While Cytek Biosciences lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$1.4m. 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. Keeping in mind its 21% revenue growth over the last year, we think there's a decent chance the company is on track. We'd see further strong growth as an optimistic indication. For riskier companies like Cytek Biosciences I always like to keep an eye on the long term profit and revenue trends. Fortunately, you can click to see our interactive graph of its profit, revenue, and operating cashflow.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com