ProPetro Holding (NYSE:PUMP) Has A Somewhat Strained Balance Sheet

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that ProPetro Holding Corp. (NYSE:PUMP) does use debt in its business. 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. If things get really bad, the lenders can take control of the business. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is ProPetro Holding's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 ProPetro Holding had debt of US$63.5m, up from US$45.0m in one year. However, its balance sheet shows it holds US$83.0m in cash, so it actually has US$19.5m net cash.

A Look At ProPetro Holding's Liabilities

According to the last reported balance sheet, ProPetro Holding had liabilities of US$231.1m due within 12 months, and liabilities of US$174.1m due beyond 12 months. Offsetting these obligations, it had cash of US$83.0m as well as receivables valued at US$210.7m due within 12 months. So its liabilities total US$111.4m more than the combination of its cash and short-term receivables.

While this might seem like a lot, it is not so bad since ProPetro Holding has a market capitalization of US$529.2m, and so it could probably strengthen its balance sheet by raising capital if it needed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. While it does have liabilities worth noting, ProPetro Holding also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for ProPetro Holding

The modesty of its debt load may become crucial for ProPetro Holding if management cannot prevent a repeat of the 51% cut to EBIT over the last year. When a company sees its earnings tank, it can sometimes find its relationships with its lenders turn sour. 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 ProPetro Holding'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. ProPetro Holding 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. In the last three years, ProPetro Holding's free cash flow amounted to 42% of its EBIT, less than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

Although ProPetro Holding'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$19.5m. So although we see some areas for improvement, we're not too worried about ProPetro Holding's balance sheet. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 1 warning sign for ProPetro Holding that you should be aware of before investing here.

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.