Does Diebold Nixdorf (NYSE:DBD) Have A Healthy Balance Sheet?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 Diebold Nixdorf, Incorporated (NYSE:DBD) makes use of debt. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

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. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Diebold Nixdorf Carry?

You can click the graphic below for the historical numbers, but it shows that Diebold Nixdorf had US$913.3m of debt in March 2025, down from US$1.11b, one year before. However, because it has a cash reserve of US$314.6m, its net debt is less, at about US$598.7m.

A Look At Diebold Nixdorf's Liabilities

The latest balance sheet data shows that Diebold Nixdorf had liabilities of US$1.28b due within a year, and liabilities of US$1.35b falling due after that. Offsetting these obligations, it had cash of US$314.6m as well as receivables valued at US$602.6m due within 12 months. So its liabilities total US$1.72b more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of US$2.19b, so it does suggest shareholders should keep an eye on Diebold Nixdorf's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry.

See our latest analysis for Diebold Nixdorf

We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.

Given net debt is only 1.4 times EBITDA, it is initially surprising to see that Diebold Nixdorf's EBIT has low interest coverage of 2.2 times. So one way or the other, it's clear the debt levels are not trivial. Importantly, Diebold Nixdorf grew its EBIT by 42% over the last twelve months, and that growth will make it easier to handle its debt. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Diebold Nixdorf'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 business needs free cash flow to pay off debt; accounting profits just don't cut it. So the logical step is to look at the proportion of that EBIT that is matched by actual free cash flow. During the last three years, Diebold Nixdorf burned a lot of cash. While that may be a result of expenditure for growth, it does make the debt far more risky.

Our View

Neither Diebold Nixdorf's ability to convert EBIT to free cash flow nor its interest cover gave us confidence in its ability to take on more debt. But the good news is it seems to be able to grow its EBIT with ease. Taking the abovementioned factors together we do think Diebold Nixdorf's debt poses some risks to the business. While that debt can boost returns, we think the company has enough leverage now. In light of our reservations about the company's balance sheet, it seems sensible to check if insiders have been selling shares recently.

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.