Is Cryoport (NASDAQ:CYRX) A Risky Investment?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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 can see that Cryoport, Inc. (NASDAQ:CYRX) does use debt in its business. But the more important question is: how much risk is that debt creating?

Why Does Debt Bring Risk?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth 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.

View our latest analysis for Cryoport

What Is Cryoport's Debt?

You can click the graphic below for the historical numbers, but it shows that Cryoport had US$371.3m of debt in June 2024, down from US$408.4m, one year before. However, it does have US$427.1m in cash offsetting this, leading to net cash of US$55.9m.

How Strong Is Cryoport's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Cryoport had liabilities of US$59.9m due within 12 months and liabilities of US$392.4m due beyond that. Offsetting these obligations, it had cash of US$427.1m as well as receivables valued at US$40.2m due within 12 months. So it actually has US$15.1m 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. Succinctly put, Cryoport 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 it is future earnings, more than anything, that will determine Cryoport'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.

Over 12 months, Cryoport made a loss at the EBIT level, and saw its revenue drop to US$226m, which is a fall of 6.3%. 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 we do note that Cryoport had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of US$45m and booked a US$181m accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of US$55.9m. 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. 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. To that end, you should be aware of the 1 warning sign we've spotted with Cryoport .

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.