Does CyberArk Software (NASDAQ:CYBR) Have A Healthy Balance Sheet?

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 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 CyberArk Software Ltd. (NASDAQ:CYBR) makes use of debt. But the real question is whether this debt is making the company risky.

Why Does Debt Bring Risk?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest 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 CyberArk Software

How Much Debt Does CyberArk Software Carry?

The chart below, which you can click on for greater detail, shows that CyberArk Software had US$570.1m in debt in March 2023; about the same as the year before. However, it does have US$913.8m in cash offsetting this, leading to net cash of US$343.7m.

How Healthy Is CyberArk Software's Balance Sheet?

We can see from the most recent balance sheet that CyberArk Software had liabilities of US$443.6m falling due within a year, and liabilities of US$683.9m due beyond that. Offsetting this, it had US$913.8m in cash and US$87.5m in receivables that were due within 12 months. So it has liabilities totalling US$126.2m more than its cash and near-term receivables, combined.

This state of affairs indicates that CyberArk Software's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the US$6.45b company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, CyberArk Software boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine CyberArk Software'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.

Over 12 months, CyberArk Software reported revenue of US$626m, which is a gain of 21%, 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 CyberArk Software?

Although CyberArk Software had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of US$18m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. One positive is that CyberArk Software is growing revenue apace, which makes it easier to sell a growth story and raise capital if need be. But that doesn't change our opinion that the stock is 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. Be aware that CyberArk Software is showing 1 warning sign in our investment analysis , you should know about...

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.

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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.