Lumine Group (CVE:LMN) Seems To Use Debt Rather Sparingly

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. We can see that Lumine Group Inc. (CVE:LMN) does use debt in its business. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Lumine Group's Debt?

As you can see below, Lumine Group had US$244.1m of debt at June 2025, down from US$291.0m a year prior. However, its balance sheet shows it holds US$289.7m in cash, so it actually has US$45.6m net cash.

A Look At Lumine Group's Liabilities

According to the last reported balance sheet, Lumine Group had liabilities of US$239.4m due within 12 months, and liabilities of US$352.1m due beyond 12 months. On the other hand, it had cash of US$289.7m and US$217.8m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$83.9m.

This state of affairs indicates that Lumine Group's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the US$7.16b company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, Lumine Group boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Lumine Group

In addition to that, we're happy to report that Lumine Group has boosted its EBIT by 98%, thus reducing the spectre of future debt repayments. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Lumine Group'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, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Lumine Group may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Happily for any shareholders, Lumine Group actually produced more free cash flow than EBIT over the last three years. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

We could understand if investors are concerned about Lumine Group's liabilities, but we can be reassured by the fact it has has net cash of US$45.6m. The cherry on top was that in converted 144% of that EBIT to free cash flow, bringing in US$186m. So is Lumine Group's debt a risk? It doesn't seem so to us. We'd be very excited to see if Lumine Group insiders have been snapping up shares. If you are too, then click on this link right now to take a (free) peek at our list of reported insider transactions.

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.