Is Cemtrex (NASDAQ:CETX) Weighed On By Its Debt Load?

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. We can see that Cemtrex, Inc. (NASDAQ:CETX) does use debt in its business. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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 think about a company's use of debt, we first look at cash and debt together.

What Is Cemtrex's Debt?

The image below, which you can click on for greater detail, shows that Cemtrex had debt of US$21.7m at the end of March 2025, a reduction from US$26.5m over a year. However, it also had US$4.54m in cash, and so its net debt is US$17.1m.

A Look At Cemtrex's Liabilities

According to the last reported balance sheet, Cemtrex had liabilities of US$23.6m due within 12 months, and liabilities of US$15.9m due beyond 12 months. Offsetting these obligations, it had cash of US$4.54m as well as receivables valued at US$14.4m due within 12 months. So its liabilities total US$20.6m more than the combination of its cash and short-term receivables.

This deficit casts a shadow over the US$4.34m company, like a colossus towering over mere mortals. So we definitely think shareholders need to watch this one closely. After all, Cemtrex would likely require a major re-capitalisation if it had to pay its creditors today. When analysing debt levels, the balance sheet is the obvious place to start. But it is Cemtrex's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

View our latest analysis for Cemtrex

In the last year Cemtrex wasn't profitable at an EBIT level, but managed to grow its revenue by 13%, to US$74m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months Cemtrex produced an earnings before interest and tax (EBIT) loss. Its EBIT loss was a whopping US$633k. If you consider the significant liabilities mentioned above, we are extremely wary of this investment. That said, it is possible that the company will turn its fortunes around. But we think that is unlikely, given it is low on liquid assets, and burned through US$1.9m in the last year. So we think this stock is risky, like walking through a dirty dog park with a mask on. 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. For example Cemtrex has 4 warning signs (and 3 which are a bit unpleasant) we think 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.