Flughafen Wien (VIE:FLU) Has A Rock Solid Balance Sheet

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 Flughafen Wien Aktiengesellschaft (VIE:FLU) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

Why Does Debt Bring Risk?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

See our latest analysis for Flughafen Wien

What Is Flughafen Wien's Debt?

You can click the graphic below for the historical numbers, but it shows that Flughafen Wien had €255.1m of debt in September 2023, down from €279.8m, one year before. However, it does have €553.5m in cash offsetting this, leading to net cash of €298.4m.

How Strong Is Flughafen Wien's Balance Sheet?

The latest balance sheet data shows that Flughafen Wien had liabilities of €339.3m due within a year, and liabilities of €455.4m falling due after that. Offsetting this, it had €553.5m in cash and €113.7m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €127.5m.

Of course, Flughafen Wien has a market capitalization of €4.24b, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. While it does have liabilities worth noting, Flughafen Wien also has more cash than debt, so we're pretty confident it can manage its debt safely.

On top of that, Flughafen Wien grew its EBIT by 75% over the last twelve months, and that growth will make it easier to handle its debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Flughafen Wien's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Flughafen Wien has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last two years, Flughafen Wien actually produced more free cash flow than EBIT. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

Summing Up

We could understand if investors are concerned about Flughafen Wien's liabilities, but we can be reassured by the fact it has has net cash of €298.4m. And it impressed us with free cash flow of €313m, being 145% of its EBIT. So we don't think Flughafen Wien's use of debt is risky. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of Flughafen Wien's earnings per share history for free.

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.