Health Check: How Prudently Does CyberArk Software (NASDAQ:CYBR) Use Debt?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 CyberArk Software Ltd. (NASDAQ:CYBR) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for CyberArk Software

How Much Debt Does CyberArk Software Carry?

As you can see below, CyberArk Software had US$520.1m of debt, at December 2021, which is about the same as the year before. You can click the chart for greater detail. But it also has US$926.4m in cash to offset that, meaning it has US$406.3m net cash.

A Look At CyberArk Software's Liabilities

We can see from the most recent balance sheet that CyberArk Software had liabilities of US$340.0m falling due within a year, and liabilities of US$626.7m due beyond that. Offsetting this, it had US$926.4m in cash and US$113.2m in receivables that were due within 12 months. So it actually has US$72.9m more liquid assets than total liabilities.

Having regard to CyberArk Software's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the US$6.14b company is struggling for cash, we still think it's worth monitoring its balance sheet. Simply put, the fact that CyberArk Software has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. 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.

In the last year CyberArk Software wasn't profitable at an EBIT level, but managed to grow its revenue by 8.3%, to US$503m. We usually like to see faster growth from unprofitable companies, but each to their own.

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$66m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. 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. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for CyberArk Software you should know about.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.