Is Cytek Biosciences (NASDAQ:CTKB) Weighed On By Its Debt Load?

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 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. As with many other companies Cytek Biosciences, Inc. (NASDAQ:CTKB) makes use of debt. But should shareholders be worried about its use of debt?

When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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.

See our latest analysis for Cytek Biosciences

What Is Cytek Biosciences's Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2024 Cytek Biosciences had US$3.23m of debt, an increase on US$2.28m, over one year. However, it does have US$277.8m in cash offsetting this, leading to net cash of US$274.5m.

A Look At Cytek Biosciences' Liabilities

The latest balance sheet data shows that Cytek Biosciences had liabilities of US$62.8m due within a year, and liabilities of US$43.0m falling due after that. Offsetting these obligations, it had cash of US$277.8m as well as receivables valued at US$52.7m due within 12 months. So it actually has US$224.7m more liquid assets than total liabilities.

This excess liquidity suggests that Cytek Biosciences is taking a careful approach to debt. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, Cytek Biosciences boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Cytek Biosciences'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.

In the last year Cytek Biosciences wasn't profitable at an EBIT level, but managed to grow its revenue by 9.9%, to US$201m. We usually like to see faster growth from unprofitable companies, but each to their own.

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$29m. 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. With mediocre revenue growth in the last year, we're don't find the investment opportunity particularly compelling. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - Cytek Biosciences has 1 warning sign we think you should be aware of.

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.