We Think Technip Energies (EPA:TE) Can Manage Its Debt With Ease

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. As with many other companies Technip Energies N.V. (EPA:TE) makes use of debt. But should shareholders be worried about its use of debt?

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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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest 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 Net Debt?

The image below, which you can click on for greater detail, shows that Technip Energies had debt of €722.6m at the end of June 2025, a reduction from €785.2m over a year. But on the other hand it also has €3.88b in cash, leading to a €3.16b net cash position.

How Strong Is Technip Energies' Balance Sheet?

According to the last reported balance sheet, Technip Energies had liabilities of €5.96b due within 12 months, and liabilities of €1.18b due beyond 12 months. Offsetting these obligations, it had cash of €3.88b as well as receivables valued at €1.93b due within 12 months. So it has liabilities totalling €1.32b more than its cash and near-term receivables, combined.

Of course, Technip Energies has a market capitalization of €7.08b, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. 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.

View our latest analysis for Technip Energies

Fortunately, Technip Energies grew its EBIT by 9.9% 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 ultimately the future profitability of the business will decide if Technip Energies can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Technip Energies 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, Technip Energies actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While Technip Energies does have more liabilities than liquid assets, it also has net cash of €3.16b. And it impressed us with free cash flow of €1.3b, being 103% of its EBIT. So is Technip Energies's debt a risk? It doesn't seem so to us. Another factor that would give us confidence in Technip Energies would be if insiders have been buying shares: if you're conscious of that signal too, you can find out instantly by clicking this link.

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.