Is Cryoport (NASDAQ:CYRX) Using Debt In A Risky Way?

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.' 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. We note that Cryoport, Inc. (NASDAQ:CYRX) does have debt on its balance sheet. But is this debt a concern to shareholders?

When Is Debt A Problem?

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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for Cryoport

What Is Cryoport's Debt?

As you can see below, Cryoport had US$378.3m of debt at September 2023, down from US$407.4m a year prior. But on the other hand it also has US$465.9m in cash, leading to a US$87.5m net cash position.

A Look At Cryoport's Liabilities

Zooming in on the latest balance sheet data, we can see that Cryoport had liabilities of US$44.9m due within 12 months and liabilities of US$418.2m due beyond that. Offsetting these obligations, it had cash of US$465.9m as well as receivables valued at US$42.6m due within 12 months. So it actually has US$45.4m 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. 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're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year Cryoport's revenue was pretty flat, and it made a negative EBIT. While that hardly impresses, its not too bad either.

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$41m and booked a US$55m accounting loss. But the saving grace is the US$87.5m on the balance sheet. 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. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Cryoport you should know about.

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.