These 4 Measures Indicate That Symal Group (ASX:SYL) Is Using Debt Reasonably Well

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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 can see that Symal Group Limited (ASX:SYL) does use debt in its business. But the more important question is: how much risk is that debt creating?

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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 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, 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.

How Much Debt Does Symal Group Carry?

As you can see below, at the end of June 2025, Symal Group had AU$122.9m of debt, up from AU$9.16m a year ago. Click the image for more detail. However, its balance sheet shows it holds AU$169.0m in cash, so it actually has AU$46.1m net cash.

How Strong Is Symal Group's Balance Sheet?

The latest balance sheet data shows that Symal Group had liabilities of AU$260.8m due within a year, and liabilities of AU$126.0m falling due after that. On the other hand, it had cash of AU$169.0m and AU$122.1m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by AU$95.7m.

While this might seem like a lot, it is not so bad since Symal Group has a market capitalization of AU$460.5m, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. Despite its noteworthy liabilities, Symal Group boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Symal Group

Also good is that Symal Group grew its EBIT at 11% over the last year, further increasing its ability to manage debt. 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 Symal Group 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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Symal Group 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 three years, Symal Group actually produced more free cash flow than EBIT. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

While Symal Group does have more liabilities than liquid assets, it also has net cash of AU$46.1m. And it impressed us with free cash flow of AU$29m, being 105% of its EBIT. So is Symal Group's debt a risk? It doesn't seem so to us. Of course, we wouldn't say no to the extra confidence that we'd gain if we knew that Symal Group insiders have been buying shares: if you're on the same wavelength, you can find out if insiders are buying by clicking this link.

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.