We Think IES Holdings (NASDAQ:IESC) Can Manage Its Debt With Ease

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies IES Holdings, Inc. (NASDAQ:IESC) makes use of debt. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. 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, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is IES Holdings's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 IES Holdings had US$20.0m of debt, an increase on none, over one year. However, it does have US$168.3m in cash offsetting this, leading to net cash of US$148.3m.

A Look At IES Holdings' Liabilities

Zooming in on the latest balance sheet data, we can see that IES Holdings had liabilities of US$546.6m due within 12 months and liabilities of US$100.7m due beyond that. Offsetting this, it had US$168.3m in cash and US$708.7m in receivables that were due within 12 months. So it can boast US$229.7m more liquid assets than total liabilities.

This surplus suggests that IES Holdings has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, IES Holdings boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for IES Holdings

Also positive, IES Holdings grew its EBIT by 26% in the last year, and that should make it easier to pay down debt, going forward. 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 IES Holdings 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 business needs free cash flow to pay off debt; accounting profits just don't cut it. While IES Holdings 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. During the last three years, IES Holdings produced sturdy free cash flow equating to 61% 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.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that IES Holdings has net cash of US$148.3m, as well as more liquid assets than liabilities. And we liked the look of last year's 26% year-on-year EBIT growth. So we don't think IES Holdings's use of debt is risky. 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. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for IES Holdings you should know about.

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.