Laureate Education (NASDAQ:LAUR) Seems To Use Debt Quite Sensibly

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that Laureate Education, Inc. (NASDAQ:LAUR) does have debt on its balance sheet. But is this debt a concern to shareholders?

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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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Laureate Education's Debt?

You can click the graphic below for the historical numbers, but it shows that Laureate Education had US$59.5m of debt in June 2025, down from US$176.1m, one year before. However, its balance sheet shows it holds US$135.3m in cash, so it actually has US$75.9m net cash.

A Look At Laureate Education's Liabilities

We can see from the most recent balance sheet that Laureate Education had liabilities of US$433.1m falling due within a year, and liabilities of US$550.1m due beyond that. On the other hand, it had cash of US$135.3m and US$149.5m worth of receivables due within a year. So it has liabilities totalling US$698.3m more than its cash and near-term receivables, combined.

Since publicly traded Laureate Education shares are worth a total of US$4.03b, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Laureate Education boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Laureate Education

The good news is that Laureate Education has increased its EBIT by 8.2% over twelve months, which should ease any concerns about debt repayment. 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 Laureate 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 Laureate 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. Over the most recent three years, Laureate Education recorded free cash flow worth 54% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

Although Laureate Education's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of US$75.9m. And it also grew its EBIT by 8.2% over the last year. So we are not troubled with Laureate Education's debt use. We'd be motivated to research the stock further if we found out that Laureate Education insiders have bought shares recently. If you would too, then you're in luck, since today we're sharing our list of reported insider transactions for free.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.