Is CrowdStrike Holdings (NASDAQ:CRWD) A Risky Investment?

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.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, CrowdStrike Holdings, Inc. (NASDAQ:CRWD) does carry debt. But the more important question is: how much risk is that debt creating?

When Is Debt Dangerous?

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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for CrowdStrike Holdings

How Much Debt Does CrowdStrike Holdings Carry?

The chart below, which you can click on for greater detail, shows that CrowdStrike Holdings had US$742.5m in debt in January 2024; about the same as the year before. However, it does have US$3.47b in cash offsetting this, leading to net cash of US$2.73b.

How Healthy Is CrowdStrike Holdings' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that CrowdStrike Holdings had liabilities of US$2.70b due within 12 months and liabilities of US$1.61b due beyond that. Offsetting this, it had US$3.47b in cash and US$853.1m in receivables that were due within 12 months. So its total liabilities are just about perfectly matched by its shorter-term, liquid assets.

Having regard to CrowdStrike Holdings' size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the US$77.5b company is struggling for cash, we still think it's worth monitoring its balance sheet. Simply put, the fact that CrowdStrike Holdings 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 CrowdStrike Holdings 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.

Over 12 months, CrowdStrike Holdings reported revenue of US$3.1b, which is a gain of 36%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

So How Risky Is CrowdStrike Holdings?

While CrowdStrike Holdings lost money on an earnings before interest and tax (EBIT) level, it actually booked a paper profit of US$89m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. We think its revenue growth of 36% is a good sign. There's no doubt fast top line growth can cure all manner of ills, for a stock. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. Be aware that CrowdStrike Holdings is showing 2 warning signs in our investment analysis , 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.