We Think Enovis (NYSE:ENOV) Has A Fair Chunk Of Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Enovis Corporation (NYSE:ENOV) does use debt in its business. But the more important question is: how much risk is that debt creating?

What Risk Does Debt Bring?

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. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

Check out our latest analysis for Enovis

How Much Debt Does Enovis Carry?

The image below, which you can click on for greater detail, shows that Enovis had debt of US$285.0m at the end of March 2023, a reduction from US$2.07b over a year. However, it also had US$21.9m in cash, and so its net debt is US$263.1m.

A Look At Enovis' Liabilities

According to the last reported balance sheet, Enovis had liabilities of US$349.5m due within 12 months, and liabilities of US$504.8m due beyond 12 months. Offsetting these obligations, it had cash of US$21.9m as well as receivables valued at US$280.7m due within 12 months. So it has liabilities totalling US$551.7m more than its cash and near-term receivables, combined.

Of course, Enovis has a market capitalization of US$3.28b, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Enovis 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.

Over 12 months, Enovis reported revenue of US$1.6b, which is a gain of 7.0%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months Enovis produced an earnings before interest and tax (EBIT) loss. Indeed, it lost US$9.0m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled US$146m in negative free cash flow over the last twelve months. So to be blunt we think it is risky. For riskier companies like Enovis I always like to keep an eye on the long term profit and revenue trends. Fortunately, you can click to see our interactive graph of its profit, revenue, and operating cashflow.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.