Would ZenaTech (NASDAQ:ZENA) Be Better Off With Less Debt?

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. Importantly, ZenaTech, Inc. (NASDAQ:ZENA) does carry debt. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. 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. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is ZenaTech's Debt?

The image below, which you can click on for greater detail, shows that at June 2025 ZenaTech had debt of CA$18.7m, up from CA$9.37m in one year. On the flip side, it has CA$10.3m in cash leading to net debt of about CA$8.39m.

How Healthy Is ZenaTech's Balance Sheet?

According to the last reported balance sheet, ZenaTech had liabilities of CA$2.25m due within 12 months, and liabilities of CA$18.8m due beyond 12 months. On the other hand, it had cash of CA$10.3m and CA$1.59m worth of receivables due within a year. So it has liabilities totalling CA$9.17m more than its cash and near-term receivables, combined.

Since publicly traded ZenaTech shares are worth a total of CA$252.8m, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if ZenaTech 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 ZenaTech

In the last year ZenaTech wasn't profitable at an EBIT level, but managed to grow its revenue by 127%, to CA$4.4m. So its pretty obvious shareholders are hoping for more growth!

Caveat Emptor

Despite the top line growth, ZenaTech still had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at CA$9.9m. 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. However, it doesn't help that it burned through CA$23m of cash over the last year. So in short it's a really risky stock. 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 5 warning signs for ZenaTech (of which 1 doesn't sit too well with us!) you should know about.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.