ProPetro Holding (NYSE:PUMP) Takes On Some Risk With Its Use Of Debt

Warren Buffett famously said, '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. Importantly, ProPetro Holding Corp. (NYSE:PUMP) does carry debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

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. 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, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is ProPetro Holding's Debt?

The chart below, which you can click on for greater detail, shows that ProPetro Holding had US$45.0m in debt in March 2025; about the same as the year before. However, it does have US$71.4m in cash offsetting this, leading to net cash of US$26.4m.

A Look At ProPetro Holding's Liabilities

According to the last reported balance sheet, ProPetro Holding had liabilities of US$239.1m due within 12 months, and liabilities of US$180.6m due beyond 12 months. Offsetting this, it had US$71.4m in cash and US$240.7m in receivables that were due within 12 months. So it has liabilities totalling US$107.6m more than its cash and near-term receivables, combined.

Given ProPetro Holding has a market capitalization of US$669.2m, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. 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.

Check out our latest analysis for ProPetro Holding

It is just as well that ProPetro Holding's load is not too heavy, because its EBIT was down 71% over the last year. Falling earnings (if the trend continues) could eventually make even modest debt quite risky. When analysing debt levels, the balance sheet is the obvious place to start. 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 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. 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 35% of its EBIT, less than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While ProPetro Holding does have more liabilities than liquid assets, it also has net cash of US$26.4m. So although we see some areas for improvement, we're not too worried about ProPetro Holding's balance sheet. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should be aware of the 1 warning sign we've spotted with ProPetro Holding .

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.

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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.