bioMérieux (EPA:BIM) Has A Pretty Healthy Balance Sheet

Warren Buffett famously said, '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. As with many other companies bioMérieux S.A. (EPA:BIM) makes use of debt. But is this debt a concern to shareholders?

When Is Debt A Problem?

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. 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. 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.

Check out our latest analysis for bioMérieux

How Much Debt Does bioMérieux Carry?

You can click the graphic below for the historical numbers, but it shows that as of June 2022 bioMérieux had €472.6m of debt, an increase on €395.4m, over one year. But on the other hand it also has €524.2m in cash, leading to a €51.6m net cash position.

How Strong Is bioMérieux's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that bioMérieux had liabilities of €1.02b due within 12 months and liabilities of €506.6m due beyond that. On the other hand, it had cash of €524.2m and €825.7m worth of receivables due within a year. So its liabilities total €177.4m more than the combination of its cash and short-term receivables.

Having regard to bioMérieux's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the €11.7b company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, bioMérieux also has more cash than debt, so we're pretty confident it can manage its debt safely.

bioMérieux's EBIT was pretty flat over the last year, but that shouldn't be an issue given the it doesn't have a lot of debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine bioMérieux's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While bioMérieux 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. Looking at the most recent three years, bioMérieux recorded free cash flow of 47% of its EBIT, which is weaker than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

We could understand if investors are concerned about bioMérieux's liabilities, but we can be reassured by the fact it has has net cash of €51.6m. So we don't have any problem with bioMérieux's use of debt. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of bioMérieux's earnings per share history for free.

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.