Does Kazakhtelecom JSC (FRA:KZTA) Have A Healthy Balance Sheet?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Kazakhtelecom JSC (FRA:KZTA) does carry debt. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

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 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.

How Much Debt Does Kazakhtelecom JSC Carry?

The image below, which you can click on for greater detail, shows that Kazakhtelecom JSC had debt of ₸248.5b at the end of March 2025, a reduction from ₸297.6b over a year. However, it does have ₸313.6b in cash offsetting this, leading to net cash of ₸65.1b.

How Healthy Is Kazakhtelecom JSC's Balance Sheet?

We can see from the most recent balance sheet that Kazakhtelecom JSC had liabilities of ₸227.4b falling due within a year, and liabilities of ₸337.2b due beyond that. Offsetting this, it had ₸313.6b in cash and ₸68.5b in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₸182.5b.

Having regard to Kazakhtelecom JSC's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the ₸267t company is short on cash, but still worth keeping an eye on the balance sheet. While it does have liabilities worth noting, Kazakhtelecom JSC also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Kazakhtelecom JSC

Even more impressive was the fact that Kazakhtelecom JSC grew its EBIT by 248% over twelve months. That boost will make it even easier to pay down debt going forward. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Kazakhtelecom JSC's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Kazakhtelecom JSC 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, Kazakhtelecom JSC recorded negative free cash flow, in total. Debt is usually more expensive, and almost always more risky in the hands of a company with negative free cash flow. Shareholders ought to hope for an improvement.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that Kazakhtelecom JSC has ₸65.1b in net cash. And it impressed us with its EBIT growth of 248% over the last year. So we don't have any problem with Kazakhtelecom JSC's use of debt. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 3 warning signs for Kazakhtelecom JSC you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.