These 4 Measures Indicate That Vista Group International (NZSE:VGL) Is Using Debt Reasonably Well

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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Vista Group International Limited (NZSE:VGL) does carry debt. But should shareholders be worried about its use of debt?

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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. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Vista Group International Carry?

As you can see below, Vista Group International had NZ$18.8m of debt at June 2025, down from NZ$20.1m a year prior. However, it does have NZ$21.9m in cash offsetting this, leading to net cash of NZ$3.10m.

How Healthy Is Vista Group International's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Vista Group International had liabilities of NZ$60.2m due within 12 months and liabilities of NZ$19.1m due beyond that. Offsetting this, it had NZ$21.9m in cash and NZ$44.8m in receivables that were due within 12 months. So it has liabilities totalling NZ$12.6m more than its cash and near-term receivables, combined.

Having regard to Vista Group International's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the NZ$749.9m company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, Vista Group International also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Vista Group International

Notably, Vista Group International made a loss at the EBIT level, last year, but improved that to positive EBIT of NZ$4.2m in the last twelve months. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Vista Group International'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 Vista Group International 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. Happily for any shareholders, Vista Group International actually produced more free cash flow than EBIT over the last year. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

We could understand if investors are concerned about Vista Group International's liabilities, but we can be reassured by the fact it has has net cash of NZ$3.10m. And it impressed us with free cash flow of NZ$10m, being 243% of its EBIT. So we are not troubled with Vista Group International's debt use. We'd be motivated to research the stock further if we found out that Vista Group International insiders have bought shares recently. If you would too, then you're in luck, since today we're sharing our list of reported insider transactions 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.