Is Cryoport (NASDAQ:CYRX) A Risky Investment?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Cryoport, Inc. (NASDAQ:CYRX) makes use of debt. But the real question is whether this debt is making the company risky.

What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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?

As you can see below, Cryoport had US$407.8m of debt, at March 2023, which is about the same as the year before. You can click the chart for greater detail. But it also has US$522.6m in cash to offset that, meaning it has US$114.8m net cash.

How Strong Is Cryoport's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Cryoport had liabilities of US$41.6m due within 12 months and liabilities of US$446.0m due beyond that. On the other hand, it had cash of US$522.6m and US$45.6m worth of receivables due within a year. So it actually has US$80.6m 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. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Cryoport can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

In the last year Cryoport wasn't profitable at an EBIT level, but managed to grow its revenue by 12%, to US$248m. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Cryoport?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And in the last year Cryoport had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of US$29m and booked a US$38m accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of US$114.8m. That means it could keep spending at its current rate for more than two years. 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. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for Cryoport you should know about.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.