Elevance Health (NYSE:ELV) Has A Pretty Healthy Balance Sheet

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 Elevance Health, Inc. (NYSE:ELV) makes use of debt. But should shareholders be worried about its use of debt?

We've discovered 1 warning sign about Elevance Health. View them for free.

When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth 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 Elevance Health's Net Debt?

The image below, which you can click on for greater detail, shows that at March 2025 Elevance Health had debt of US$30.0b, up from US$26.5b in one year. But it also has US$33.7b in cash to offset that, meaning it has US$3.65b net cash.

A Look At Elevance Health's Liabilities

Zooming in on the latest balance sheet data, we can see that Elevance Health had liabilities of US$42.7b due within 12 months and liabilities of US$34.4b due beyond that. On the other hand, it had cash of US$33.7b and US$22.0b worth of receivables due within a year. So it has liabilities totalling US$21.5b more than its cash and near-term receivables, combined.

This deficit isn't so bad because Elevance Health is worth a massive US$91.4b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. Despite its noteworthy liabilities, Elevance Health boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Elevance Health

But the bad news is that Elevance Health has seen its EBIT plunge 11% in the last twelve months. If that rate of decline in earnings continues, the company could find itself in a tight spot. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Elevance Health 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 Elevance Health 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, Elevance Health recorded free cash flow worth 61% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

Although Elevance Health'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$3.65b. So we are not troubled with Elevance Health's debt use. 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. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Elevance Health you should know about.

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.