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 might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that Cytek Biosciences, Inc. (NASDAQ:CTKB) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

When Is Debt Dangerous?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, 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 Cytek Biosciences's Debt?

The image below, which you can click on for greater detail, shows that at June 2024 Cytek Biosciences had debt of US$3.26m, up from US$2.43m in one year. However, it does have US$277.2m in cash offsetting this, leading to net cash of US$274.0m.

How Healthy Is Cytek Biosciences' Balance Sheet?

According to the last reported balance sheet, Cytek Biosciences had liabilities of US$52.4m due within 12 months, and liabilities of US$42.2m due beyond 12 months. Offsetting these obligations, it had cash of US$277.2m as well as receivables valued at US$44.8m due within 12 months. So it can boast US$227.4m more liquid assets than total liabilities.

This surplus strongly suggests that Cytek Biosciences has a rock-solid balance sheet (and the debt is of no concern whatsoever). Having regard to this fact, we think its balance sheet is as strong as an ox. Succinctly put, Cytek Biosciences 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 ultimately the future profitability of the business will decide if Cytek Biosciences 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.

In the last year Cytek Biosciences wasn't profitable at an EBIT level, but managed to grow its revenue by 13%, to US$198m. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Cytek Biosciences?

While Cytek Biosciences lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$11m. 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. With mediocre revenue growth in the last year, we're don't find the investment opportunity particularly compelling. For riskier companies like Cytek Biosciences I always like to keep an eye on the long term profit and revenue trends. Fortunately, you can click to see our interactive graph of its profit, revenue, and operating cashflow.

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.