Schindler Holding (VTX:SCHN) Could Easily Take On More Debt

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 Schindler Holding AG (VTX:SCHN) does use debt in its business. 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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Schindler Holding's Debt?

You can click the graphic below for the historical numbers, but it shows that Schindler Holding had CHF215.0m of debt in June 2025, down from CHF274.0m, one year before. However, it does have CHF3.59b in cash offsetting this, leading to net cash of CHF3.38b.

How Healthy Is Schindler Holding's Balance Sheet?

The latest balance sheet data shows that Schindler Holding had liabilities of CHF5.52b due within a year, and liabilities of CHF1.12b falling due after that. Offsetting this, it had CHF3.59b in cash and CHF2.92b in receivables that were due within 12 months. So these liquid assets roughly match the total liabilities.

Having regard to Schindler Holding's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the CHF31.2b company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, Schindler Holding also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for Schindler Holding

The good news is that Schindler Holding has increased its EBIT by 9.9% over twelve months, which should ease any concerns about debt repayment. 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 Schindler 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, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Schindler 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. Happily for any shareholders, Schindler Holding 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 Schindler Holding's liabilities, but we can be reassured by the fact it has has net cash of CHF3.38b. And it impressed us with free cash flow of CHF1.5b, being 101% of its EBIT. So we don't think Schindler Holding'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 Schindler Holding's earnings per share history for free.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.