Does ALK-Abelló (CPH:ALK B) Have A Healthy Balance Sheet?

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. Importantly, ALK-Abelló A/S (CPH:ALK B) does carry debt. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

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. 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. 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.

How Much Debt Does ALK-Abelló Carry?

The image below, which you can click on for greater detail, shows that at June 2025 ALK-Abelló had debt of kr.288.0m, up from kr.194.0m in one year. However, its balance sheet shows it holds kr.509.0m in cash, so it actually has kr.221.0m net cash.

A Look At ALK-Abelló's Liabilities

Zooming in on the latest balance sheet data, we can see that ALK-Abelló had liabilities of kr.1.54b due within 12 months and liabilities of kr.886.0m due beyond that. Offsetting this, it had kr.509.0m in cash and kr.1.10b in receivables that were due within 12 months. So its liabilities total kr.814.0m more than the combination of its cash and short-term receivables.

Having regard to ALK-Abelló's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the kr.47.2b company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, ALK-Abelló boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for ALK-Abelló

In addition to that, we're happy to report that ALK-Abelló has boosted its EBIT by 48%, thus reducing the spectre of future debt repayments. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine ALK-Abelló's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While ALK-Abelló 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. In the last three years, ALK-Abelló's free cash flow amounted to 25% of its EBIT, less than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that ALK-Abelló has kr.221.0m in net cash. And it impressed us with its EBIT growth of 48% over the last year. So we don't think ALK-Abelló's use of debt is risky. Over time, share prices tend to follow earnings per share, so if you're interested in ALK-Abelló, you may well want to click here to check an interactive graph of its earnings per share history.

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.