Is DO & CO (VIE:DOC) Using Too Much Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. We note that DO & CO Aktiengesellschaft (VIE:DOC) does have debt on its balance sheet. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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 DO & CO's Debt?

You can click the graphic below for the historical numbers, but it shows that DO & CO had €76.2m of debt in September 2025, down from €193.4m, one year before. But it also has €218.1m in cash to offset that, meaning it has €142.0m net cash.

How Strong Is DO & CO's Balance Sheet?

The latest balance sheet data shows that DO & CO had liabilities of €525.8m due within a year, and liabilities of €258.8m falling due after that. On the other hand, it had cash of €218.1m and €310.0m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by €256.5m.

Given DO & CO has a market capitalization of €2.25b, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, DO & CO boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for DO & CO

Another good sign is that DO & CO has been able to increase its EBIT by 25% in twelve months, making it easier to pay down debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine DO & CO's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. DO & CO 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. During the last three years, DO & CO produced sturdy free cash flow equating to 75% of its EBIT, about what we'd expect. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While DO & CO does have more liabilities than liquid assets, it also has net cash of €142.0m. The cherry on top was that in converted 75% of that EBIT to free cash flow, bringing in €130m. So is DO & CO's debt a risk? It doesn't seem so to us. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of DO & CO's earnings per share history for free.

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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.