Here's Why MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság (BUSE:MOL) Has A Meaningful Debt Burden

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. We can see that MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság (BUSE:MOL) does use debt in its business. But is this debt a concern to shareholders?

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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. If things get really bad, the lenders can take control of the business. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság's Net Debt?

As you can see below, MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság had Ft954.6b of debt at September 2025, down from Ft1.06t a year prior. However, it does have Ft512.9b in cash offsetting this, leading to net debt of about Ft441.7b.

How Strong Is MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság's Balance Sheet?

The latest balance sheet data shows that MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság had liabilities of Ft1.94t due within a year, and liabilities of Ft1.70t falling due after that. Offsetting these obligations, it had cash of Ft512.9b as well as receivables valued at Ft1.04t due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by Ft2.09t.

When you consider that this deficiency exceeds the company's Ft1.88t market capitalization, you might well be inclined to review the balance sheet intently. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price.

Check out our latest analysis for MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság

We measure a company's debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.

MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság has net debt of just 0.45 times EBITDA, suggesting it could ramp leverage without breaking a sweat. And remarkably, despite having net debt, it actually received more in interest over the last twelve months than it had to pay. So there's no doubt this company can take on debt while staying cool as a cucumber. The modesty of its debt load may become crucial for MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság if management cannot prevent a repeat of the 39% cut to EBIT over the last year. Falling earnings (if the trend continues) could eventually make even modest debt quite risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság 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, while the tax-man may adore accounting profits, lenders only accept cold hard cash. So it's worth checking how much of that EBIT is backed by free cash flow. During the last three years, MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság produced sturdy free cash flow equating to 73% of its EBIT, about what we'd expect. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Our View

While MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság's EBIT growth rate has us nervous. To wit both its interest cover and conversion of EBIT to free cash flow were encouraging signs. Taking the abovementioned factors together we do think MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság's debt poses some risks to the business. While that debt can boost returns, we think the company has enough leverage now. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. To that end, you should be aware of the 2 warning signs we've spotted with MOL Magyar Olaj- és Gázipari Nyilvánosan Muködo Részvénytársaság .

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.