Is PagerDuty (NYSE:PD) A Risky Investment?

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.' 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. Importantly, PagerDuty, Inc. (NYSE:PD) does carry debt. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is PagerDuty's Net Debt?

As you can see below, PagerDuty had US$451.4m of debt, at April 2025, which is about the same as the year before. You can click the chart for greater detail. However, its balance sheet shows it holds US$597.1m in cash, so it actually has US$145.7m net cash.

How Strong Is PagerDuty's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that PagerDuty had liabilities of US$353.7m due within 12 months and liabilities of US$410.1m due beyond that. On the other hand, it had cash of US$597.1m and US$79.7m worth of receivables due within a year. So it has liabilities totalling US$87.0m more than its cash and near-term receivables, combined.

Since publicly traded PagerDuty shares are worth a total of US$1.40b, 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. Despite its noteworthy liabilities, PagerDuty boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if PagerDuty 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.

See our latest analysis for PagerDuty

Over 12 months, PagerDuty reported revenue of US$476m, which is a gain of 8.6%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is PagerDuty?

While PagerDuty lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$110m. 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. Until we see some positive EBIT, we're a bit cautious of the stock, not least because of the rather modest revenue growth. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that PagerDuty is showing 1 warning sign in our investment analysis , 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.