Does Champion Homes (NYSE:SKY) Have A Healthy Balance Sheet?

Warren Buffett famously said, '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, Champion Homes, Inc. (NYSE:SKY) does carry debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Champion Homes's Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Champion Homes had US$127.8m of debt, an increase on US$117.5m, over one year. But it also has US$605.3m in cash to offset that, meaning it has US$477.5m net cash.

A Look At Champion Homes' Liabilities

According to the last reported balance sheet, Champion Homes had liabilities of US$466.0m due within 12 months, and liabilities of US$112.8m due beyond 12 months. Offsetting this, it had US$605.3m in cash and US$99.6m in receivables that were due within 12 months. So it can boast US$126.1m more liquid assets than total liabilities.

This surplus suggests that Champion Homes has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Champion Homes has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for Champion Homes

In addition to that, we're happy to report that Champion Homes has boosted its EBIT by 47%, thus reducing the spectre of future debt repayments. 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 Champion Homes's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Champion Homes 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, Champion Homes generated free cash flow amounting to a very robust 87% of its EBIT, more than we'd expect. That puts it in a very strong position to pay down debt.

Summing Up

While it is always sensible to investigate a company's debt, in this case Champion Homes has US$477.5m in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of US$183m, being 87% of its EBIT. So we don't think Champion Homes's use of debt is risky. Another factor that would give us confidence in Champion Homes 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.

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.