We Think Bechtle (ETR:BC8) Can Stay On Top Of Its Debt

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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 can see that Bechtle AG (ETR:BC8) does use debt in its business. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. 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. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Bechtle's Net Debt?

As you can see below, Bechtle had €550.1m of debt, at March 2025, which is about the same as the year before. You can click the chart for greater detail. But on the other hand it also has €616.2m in cash, leading to a €66.1m net cash position.

A Look At Bechtle's Liabilities

The latest balance sheet data shows that Bechtle had liabilities of €1.47b due within a year, and liabilities of €693.7m falling due after that. Offsetting these obligations, it had cash of €616.2m as well as receivables valued at €1.08b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €464.3m.

Given Bechtle has a market capitalization of €4.65b, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, Bechtle also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for Bechtle

On the other hand, Bechtle's EBIT dived 16%, over the last year. If that rate of decline in earnings continues, the company could find itself in a tight spot. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Bechtle can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Bechtle 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. During the last three years, Bechtle generated free cash flow amounting to a very robust 89% of its EBIT, more than we'd expect. That puts it in a very strong position to pay down debt.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that Bechtle has €66.1m in net cash. And it impressed us with free cash flow of €393m, being 89% of its EBIT. So we don't have any problem with Bechtle's use of debt. Over time, share prices tend to follow earnings per share, so if you're interested in Bechtle, you may well want to click here to check an interactive graph of its earnings per share history.

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.