Is Brady (NYSE:BRC) Using Too Much Debt?

Explore Brady's Fair Values from the Community and select yours

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.' 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 Brady Corporation (NYSE:BRC) does use debt in its business. But the real question is whether this debt is making the company risky.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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, 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. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Brady Carry?

You can click the graphic below for the historical numbers, but it shows that as of April 2025 Brady had US$102.8m of debt, an increase on US$63.8m, over one year. But on the other hand it also has US$152.2m in cash, leading to a US$49.3m net cash position.

How Healthy Is Brady's Balance Sheet?

The latest balance sheet data shows that Brady had liabilities of US$311.8m due within a year, and liabilities of US$218.8m falling due after that. Offsetting these obligations, it had cash of US$152.2m as well as receivables valued at US$224.4m due within 12 months. So its liabilities total US$154.1m more than the combination of its cash and short-term receivables.

Since publicly traded Brady shares are worth a total of US$3.39b, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, Brady boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Brady

Fortunately, Brady grew its EBIT by 6.2% in the last year, making that debt load look even more manageable. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Brady 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. Brady may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. During the last three years, Brady produced sturdy free cash flow equating to 71% 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 it is always sensible to look at a company's total liabilities, it is very reassuring that Brady has US$49.3m in net cash. The cherry on top was that in converted 71% of that EBIT to free cash flow, bringing in US$177m. So is Brady's debt a risk? It doesn't seem so to us. We'd be very excited to see if Brady insiders have been snapping up shares. If you are too, then click on this link right now to take a (free) peek at our list of reported insider transactions.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.