Health Check: How Prudently Does Cryoport (NASDAQ:CYRX) Use Debt?

Warren Buffett famously said, '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. Importantly, Cryoport, Inc. (NASDAQ:CYRX) does carry debt. But is this debt a concern to shareholders?

When Is Debt A Problem?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

View our latest analysis for Cryoport

What Is Cryoport's Net Debt?

The image below, which you can click on for greater detail, shows that Cryoport had debt of US$380.6m at the end of March 2024, a reduction from US$407.8m over a year. But it also has US$448.5m in cash to offset that, meaning it has US$68.0m net cash.

How Strong Is Cryoport's Balance Sheet?

The latest balance sheet data shows that Cryoport had liabilities of US$49.0m due within a year, and liabilities of US$421.7m falling due after that. Offsetting these obligations, it had cash of US$448.5m as well as receivables valued at US$41.3m due within 12 months. So it actually has US$19.1m more liquid assets than total liabilities.

This surplus suggests that Cryoport has a conservative balance sheet, and could probably eliminate its debt without much difficulty. 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 had a loss before interest and tax, and actually shrunk its revenue by 9.2%, to US$225m. That's not what we would hope to see.

So How Risky Is Cryoport?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Cryoport lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$46m of cash and made a loss of US$121m. While this does make the company a bit risky, it's important to remember it has net cash of US$68.0m. That kitty means the company can keep spending for growth for at least two years, at current rates. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. 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. Be aware that Cryoport is showing 4 warning signs in our investment analysis , you should know about...

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.

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