We Think Helix Energy Solutions Group (NYSE:HLX) Can Stay On Top Of Its Debt

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. As with many other companies Helix Energy Solutions Group, Inc. (NYSE:HLX) makes use of debt. But the more important question is: how much risk is that debt creating?

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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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Helix Energy Solutions Group Carry?

As you can see below, Helix Energy Solutions Group had US$315.2m of debt at December 2024, down from US$361.7m a year prior. However, it does have US$368.0m in cash offsetting this, leading to net cash of US$52.9m.

How Healthy Is Helix Energy Solutions Group's Balance Sheet?

According to the last reported balance sheet, Helix Energy Solutions Group had liabilities of US$304.4m due within 12 months, and liabilities of US$772.9m due beyond 12 months. On the other hand, it had cash of US$368.0m and US$273.5m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$435.8m.

While this might seem like a lot, it is not so bad since Helix Energy Solutions Group has a market capitalization of US$1.31b, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. While it does have liabilities worth noting, Helix Energy Solutions Group also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for Helix Energy Solutions Group

We note that Helix Energy Solutions Group grew its EBIT by 21% in the last year, and that should make it easier to pay down debt, going forward. 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 Helix Energy Solutions Group'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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Helix Energy Solutions Group 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. Over the last two years, Helix Energy Solutions Group actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

Although Helix Energy Solutions Group'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$52.9m. And it impressed us with free cash flow of US$163m, being 126% of its EBIT. So is Helix Energy Solutions Group's debt a risk? It doesn't seem so to us. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 2 warning signs for Helix Energy Solutions Group that you should be aware of.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.