Blue Bird (NASDAQ:BLBD) Has A Rock Solid Balance Sheet

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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, Blue Bird Corporation (NASDAQ:BLBD) does carry debt. But the real question is whether this debt is making the company risky.

We check all companies for important risks. See what we found for Blue Bird in our free report.

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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Blue Bird's Net Debt?

The image below, which you can click on for greater detail, shows that Blue Bird had debt of US$93.8m at the end of December 2024, a reduction from US$134.7m over a year. However, its balance sheet shows it holds US$136.1m in cash, so it actually has US$42.3m net cash.

A Look At Blue Bird's Liabilities

Zooming in on the latest balance sheet data, we can see that Blue Bird had liabilities of US$229.4m due within 12 months and liabilities of US$126.1m due beyond that. On the other hand, it had cash of US$136.1m and US$14.0m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$205.4m.

Given Blue Bird has a market capitalization of US$1.08b, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, Blue Bird boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Blue Bird

On top of that, Blue Bird grew its EBIT by 38% over the last twelve months, and that growth will make it easier to handle its debt. 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 Blue Bird 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. While Blue Bird 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. Over the last two years, Blue Bird recorded free cash flow worth a fulsome 91% of its EBIT, which is stronger than we'd usually expect. That positions it well to pay down debt if desirable to do so.

Summing Up

While Blue Bird does have more liabilities than liquid assets, it also has net cash of US$42.3m. And it impressed us with free cash flow of US$120m, being 91% of its EBIT. So is Blue Bird's debt a risk? It doesn't seem so to us. Another factor that would give us confidence in Blue Bird 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.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.