American Public Education (NASDAQ:APEI) Could Easily Take On More Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. As with many other companies American Public Education, Inc. (NASDAQ:APEI) makes use of debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is American Public Education's Debt?

The chart below, which you can click on for greater detail, shows that American Public Education had US$94.1m in debt in June 2025; about the same as the year before. However, it does have US$174.9m in cash offsetting this, leading to net cash of US$80.9m.

How Healthy Is American Public Education's Balance Sheet?

We can see from the most recent balance sheet that American Public Education had liabilities of US$82.9m falling due within a year, and liabilities of US$182.2m due beyond that. On the other hand, it had cash of US$174.9m and US$40.1m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$50.1m.

Since publicly traded American Public Education shares are worth a total of US$617.0m, 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. While it does have liabilities worth noting, American Public Education also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for American Public Education

In addition to that, we're happy to report that American Public Education has boosted its EBIT by 48%, thus reducing the spectre of future debt repayments. 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 American Public Education can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While American Public Education 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, American Public Education generated free cash flow amounting to a very robust 89% of its EBIT, more than we'd expect. That positions it well to pay down debt if desirable to do so.

Summing Up

We could understand if investors are concerned about American Public Education's liabilities, but we can be reassured by the fact it has has net cash of US$80.9m. And it impressed us with free cash flow of US$50m, being 89% of its EBIT. So is American Public Education's debt a risk? It doesn't seem so to us. Another factor that would give us confidence in American Public Education 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.