Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 Commerce.com, Inc. (NASDAQ:CMRC) does use debt in its business. But should shareholders be worried about its use of debt?
Why Does Debt Bring Risk?
Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.
How Much Debt Does Commerce.com Carry?
You can click the graphic below for the historical numbers, but it shows that Commerce.com had US$157.5m of debt in June 2025, down from US$340.9m, one year before. On the flip side, it has US$134.5m in cash leading to net debt of about US$23.1m.
How Strong Is Commerce.com's Balance Sheet?
According to the last reported balance sheet, Commerce.com had liabilities of US$98.3m due within 12 months, and liabilities of US$165.5m due beyond 12 months. Offsetting this, it had US$134.5m in cash and US$51.8m in receivables that were due within 12 months. So it has liabilities totalling US$77.5m more than its cash and near-term receivables, combined.
Commerce.com has a market capitalization of US$362.5m, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. 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 Commerce.com 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.
View our latest analysis for Commerce.com
In the last year Commerce.com wasn't profitable at an EBIT level, but managed to grow its revenue by 4.1%, to US$338m. We usually like to see faster growth from unprofitable companies, but each to their own.
Caveat Emptor
Over the last twelve months Commerce.com produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at US$13m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. We would feel better if it turned its trailing twelve month loss of US$18m into a profit. In the meantime, we consider the stock very risky. 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. For example, we've discovered 1 warning sign for Commerce.com that you should be aware of before investing here.
Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.
Valuation is complex, but we're here to simplify it.
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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.