Technip Energies (EPA:TE) Has A Pretty 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.' 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. Importantly, Technip Energies N.V. (EPA:TE) does carry debt. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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 think about a company's use of debt, we first look at cash and debt together.

What Is Technip Energies's Debt?

You can click the graphic below for the historical numbers, but it shows that Technip Energies had €727.6m of debt in March 2025, down from €772.5m, one year before. But on the other hand it also has €3.87b in cash, leading to a €3.14b net cash position.

A Look At Technip Energies' Liabilities

According to the last reported balance sheet, Technip Energies had liabilities of €6.03b due within 12 months, and liabilities of €1.20b due beyond 12 months. Offsetting these obligations, it had cash of €3.87b as well as receivables valued at €1.78b due within 12 months. So it has liabilities totalling €1.58b more than its cash and near-term receivables, combined.

Technip Energies has a market capitalization of €6.10b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. While it does have liabilities worth noting, Technip Energies also has more cash than debt, so we're pretty confident it can manage its debt safely.

Check out our latest analysis for Technip Energies

But the other side of the story is that Technip Energies saw its EBIT decline by 5.2% over the last year. If earnings continue to decline at that rate the company may have increasing difficulty managing its debt load. 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 Technip Energies'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, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Technip Energies 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, Technip Energies generated free cash flow amounting to a very robust 81% of its EBIT, more than we'd expect. That positions it well to pay down debt if desirable to do so.

Summing Up

Although Technip Energies's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of €3.14b. And it impressed us with free cash flow of €942m, being 81% of its EBIT. So we don't have any problem with Technip Energies'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. Case in point: We've spotted 1 warning sign for Technip Energies you should be aware of.

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.