We Think EPAM Systems (NYSE:EPAM) Can Manage Its Debt With Ease

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.' 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. As with many other companies EPAM Systems, Inc. (NYSE:EPAM) makes use of debt. But the more important question is: how much risk is that debt creating?

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

When Is Debt Dangerous?

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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is EPAM Systems's Net Debt?

The chart below, which you can click on for greater detail, shows that EPAM Systems had US$25.1m in debt in March 2025; about the same as the year before. However, it does have US$1.17b in cash offsetting this, leading to net cash of US$1.15b.

A Look At EPAM Systems' Liabilities

We can see from the most recent balance sheet that EPAM Systems had liabilities of US$789.1m falling due within a year, and liabilities of US$291.3m due beyond that. Offsetting these obligations, it had cash of US$1.17b as well as receivables valued at US$1.11b due within 12 months. So it can boast US$1.21b more liquid assets than total liabilities.

This surplus suggests that EPAM Systems has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, EPAM Systems boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for EPAM Systems

Fortunately, EPAM Systems grew its EBIT by 2.6% in the last year, making that debt load look even more manageable. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if EPAM Systems 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, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While EPAM Systems 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 last three years, EPAM Systems recorded free cash flow worth a fulsome 85% of its EBIT, which is stronger than we'd usually expect. That puts it in a very strong position to pay down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that EPAM Systems has net cash of US$1.15b, as well as more liquid assets than liabilities. And it impressed us with free cash flow of US$419m, being 85% of its EBIT. So is EPAM Systems's debt a risk? It doesn't seem so to us. Another factor that would give us confidence in EPAM Systems would be if insiders have been buying shares: if you're conscious of that signal too, you can find out instantly by clicking this link.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.