Is TechnipFMC (NYSE:FTI) A Risky Investment?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 TechnipFMC plc (NYSE:FTI) does use debt in its business. But should shareholders be worried about its use of debt?

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 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. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is TechnipFMC's Debt?

The image below, which you can click on for greater detail, shows that TechnipFMC had debt of US$904.9m at the end of March 2025, a reduction from US$1.02b over a year. However, its balance sheet shows it holds US$1.19b in cash, so it actually has US$289.6m net cash.

A Look At TechnipFMC's Liabilities

According to the last reported balance sheet, TechnipFMC had liabilities of US$5.18b due within 12 months, and liabilities of US$1.67b due beyond 12 months. Offsetting this, it had US$1.19b in cash and US$2.51b in receivables that were due within 12 months. So its liabilities total US$3.15b more than the combination of its cash and short-term receivables.

This deficit isn't so bad because TechnipFMC is worth a massive US$14.4b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. Despite its noteworthy liabilities, TechnipFMC boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for TechnipFMC

On top of that, TechnipFMC grew its EBIT by 59% over the last twelve months, and that growth will make it easier to handle its debt. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine TechnipFMC's ability to maintain a healthy balance sheet going forward. 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 company can only pay off debt with cold hard cash, not accounting profits. While TechnipFMC 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 last three years, TechnipFMC actually produced more free cash flow than EBIT. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

Summing Up

While TechnipFMC does have more liabilities than liquid assets, it also has net cash of US$289.6m. The cherry on top was that in converted 107% of that EBIT to free cash flow, bringing in US$1.3b. So is TechnipFMC's debt a risk? It doesn't seem so to us. We'd be very excited to see if TechnipFMC 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.

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.

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.