These 4 Measures Indicate That Burckhardt Compression Holding (VTX:BCHN) Is Using Debt Reasonably Well

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Burckhardt Compression Holding AG (VTX:BCHN) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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, 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 examine debt levels, we first consider both cash and debt levels, together.

What Is Burckhardt Compression Holding's Debt?

The image below, which you can click on for greater detail, shows that Burckhardt Compression Holding had debt of CHF153.3m at the end of September 2025, a reduction from CHF186.3m over a year. However, it does have CHF159.7m in cash offsetting this, leading to net cash of CHF6.32m.

How Healthy Is Burckhardt Compression Holding's Balance Sheet?

According to the last reported balance sheet, Burckhardt Compression Holding had liabilities of CHF671.8m due within 12 months, and liabilities of CHF190.5m due beyond 12 months. On the other hand, it had cash of CHF159.7m and CHF352.6m worth of receivables due within a year. So it has liabilities totalling CHF350.0m more than its cash and near-term receivables, combined.

Given Burckhardt Compression Holding has a market capitalization of CHF1.78b, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Burckhardt Compression Holding boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Burckhardt Compression Holding

Fortunately, Burckhardt Compression Holding grew its EBIT by 4.4% in the last year, making that debt load look even more manageable. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Burckhardt Compression Holding can strengthen its balance sheet over time. 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 Burckhardt Compression Holding 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 most recent three years, Burckhardt Compression Holding recorded free cash flow worth 65% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

Although Burckhardt Compression Holding's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of CHF6.32m. So we are not troubled with Burckhardt Compression Holding's debt use. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example - Burckhardt Compression Holding has 1 warning sign we think you should be aware of.

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.