Does Tigbur - Temporary Professional Personnel (TLV:TIGBUR) Have A 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, Tigbur - Temporary Professional Personnel Ltd. (TLV:TIGBUR) does carry debt. But is this debt a concern to shareholders?

Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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.

Check out our latest analysis for Tigbur - Temporary Professional Personnel

How Much Debt Does Tigbur - Temporary Professional Personnel Carry?

The chart below, which you can click on for greater detail, shows that Tigbur - Temporary Professional Personnel had ₪76.8m in debt in September 2021; about the same as the year before. However, because it has a cash reserve of ₪72.3m, its net debt is less, at about ₪4.48m.

How Healthy Is Tigbur - Temporary Professional Personnel's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Tigbur - Temporary Professional Personnel had liabilities of ₪210.1m due within 12 months and liabilities of ₪23.7m due beyond that. Offsetting these obligations, it had cash of ₪72.3m as well as receivables valued at ₪191.4m due within 12 months. So it actually has ₪29.9m more liquid assets than total liabilities.

This short term liquidity is a sign that Tigbur - Temporary Professional Personnel could probably pay off its debt with ease, as its balance sheet is far from stretched. But either way, Tigbur - Temporary Professional Personnel has virtually no net debt, so it's fair to say it does not have a heavy debt load!

We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.

Tigbur - Temporary Professional Personnel has net debt of just 0.13 times EBITDA, suggesting it could ramp leverage without breaking a sweat. But the really cool thing is that it actually managed to receive more interest than it paid, over the last year. So it's fair to say it can handle debt like a hotshot teppanyaki chef handles cooking. Even more impressive was the fact that Tigbur - Temporary Professional Personnel grew its EBIT by 116% over twelve months. That boost will make it even easier to pay down debt going forward. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Tigbur - Temporary Professional Personnel's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. So we always check how much of that EBIT is translated into free cash flow. Over the last three years, Tigbur - Temporary Professional Personnel recorded free cash flow worth a fulsome 83% of its EBIT, which is stronger than we'd usually expect. That positions it well to pay down debt if desirable to do so.

Our View

Tigbur - Temporary Professional Personnel's interest cover suggests it can handle its debt as easily as Cristiano Ronaldo could score a goal against an under 14's goalkeeper. And that's just the beginning of the good news since its conversion of EBIT to free cash flow is also very heartening. We think Tigbur - Temporary Professional Personnel is no more beholden to its lenders, than the birds are to birdwatchers. For investing nerds like us its balance sheet is almost charming. 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. For instance, we've identified 3 warning signs for Tigbur - Temporary Professional Personnel (1 can't be ignored) you should be aware of.

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.