SUSS MicroTec (ETR:SMHN) 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.' 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. As with many other companies SUSS MicroTec SE (ETR:SMHN) makes use of debt. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is SUSS MicroTec's Net Debt?

As you can see below, SUSS MicroTec had €4.70m of debt at June 2025, down from €6.00m a year prior. But it also has €99.6m in cash to offset that, meaning it has €94.9m net cash.

How Strong Is SUSS MicroTec's Balance Sheet?

The latest balance sheet data shows that SUSS MicroTec had liabilities of €152.1m due within a year, and liabilities of €83.3m falling due after that. Offsetting these obligations, it had cash of €99.6m as well as receivables valued at €96.6m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €39.1m.

Of course, SUSS MicroTec has a market capitalization of €571.6m, so these liabilities are probably manageable. 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, SUSS MicroTec boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for SUSS MicroTec

Better yet, SUSS MicroTec grew its EBIT by 111% last year, which is an impressive improvement. That boost will make it even easier to pay down debt going forward. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine SUSS MicroTec'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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. SUSS MicroTec 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. Over the last three years, SUSS MicroTec reported free cash flow worth 6.4% of its EBIT, which is really quite low. That limp level of cash conversion undermines its ability to manage and pay down debt.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that SUSS MicroTec has €94.9m in net cash. And we liked the look of last year's 111% year-on-year EBIT growth. So we don't have any problem with SUSS MicroTec's use of debt. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 3 warning signs for SUSS MicroTec (2 make us uncomfortable) you should be aware of.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.