Is KONE Oyj (HEL:KNEBV) A Risky Investment?

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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that KONE Oyj (HEL:KNEBV) 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 A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is KONE Oyj's Net Debt?

As you can see below, at the end of March 2025, KONE Oyj had €428.0m of debt, up from €204.2m a year ago. Click the image for more detail. However, it does have €1.32b in cash offsetting this, leading to net cash of €889.8m.

How Healthy Is KONE Oyj's Balance Sheet?

According to the last reported balance sheet, KONE Oyj had liabilities of €5.50b due within 12 months, and liabilities of €1.10b due beyond 12 months. On the other hand, it had cash of €1.32b and €2.52b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by €2.76b.

Of course, KONE Oyj has a titanic market capitalization of €28.9b, 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. While it does have liabilities worth noting, KONE Oyj also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for KONE Oyj

Fortunately, KONE Oyj grew its EBIT by 3.5% in the last year, making that debt load look even more manageable. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine KONE Oyj'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 KONE Oyj 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. Over the most recent three years, KONE Oyj recorded free cash flow worth 72% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

We could understand if investors are concerned about KONE Oyj's liabilities, but we can be reassured by the fact it has has net cash of €889.8m. And it impressed us with free cash flow of €1.2b, being 72% of its EBIT. So we don't think KONE Oyj's use of debt is risky. 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. Be aware that KONE Oyj is showing 1 warning sign in our investment analysis , you should know about...

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.