Bucher Industries (VTX:BUCN) Has A Pretty Healthy 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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that Bucher Industries AG (VTX:BUCN) 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 Dangerous?

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. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Bucher Industries's Net Debt?

As you can see below, Bucher Industries had CHF24.2m of debt at December 2024, down from CHF123.5m a year prior. But it also has CHF432.7m in cash to offset that, meaning it has CHF408.5m net cash.

How Strong Is Bucher Industries' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Bucher Industries had liabilities of CHF811.3m due within 12 months and liabilities of CHF91.4m due beyond that. On the other hand, it had cash of CHF432.7m and CHF535.9m worth of receivables due within a year. So it can boast CHF65.9m more liquid assets than total liabilities.

This state of affairs indicates that Bucher Industries' 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 CHF4.05b company is struggling for cash, we still think it's worth monitoring its balance sheet. Succinctly put, Bucher Industries boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Bucher Industries

It is just as well that Bucher Industries's load is not too heavy, because its EBIT was down 32% over the last year. Falling earnings (if the trend continues) could eventually make even modest debt quite risky. 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 Bucher Industries 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 business needs free cash flow to pay off debt; accounting profits just don't cut it. Bucher Industries 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. In the last three years, Bucher Industries's free cash flow amounted to 33% of its EBIT, less than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Bucher Industries has net cash of CHF408.5m, as well as more liquid assets than liabilities. So we are not troubled with Bucher Industries's debt use. 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 Bucher Industries's earnings per share history for free.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.