Does Technip Energies (EPA:TE) 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.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that Technip Energies N.V. (EPA:TE) does use debt in its business. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

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. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Technip Energies's Net Debt?

As you can see below, Technip Energies had €730.8m of debt at September 2025, down from €767.4m a year prior. But on the other hand it also has €3.79b in cash, leading to a €3.06b net cash position.

How Healthy Is Technip Energies' Balance Sheet?

We can see from the most recent balance sheet that Technip Energies had liabilities of €5.88b falling due within a year, and liabilities of €1.15b due beyond that. Offsetting these obligations, it had cash of €3.79b as well as receivables valued at €1.62b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €1.63b.

Technip Energies has a market capitalization of €5.70b, so it could very likely raise cash to ameliorate 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, Technip Energies boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Technip Energies

On the other hand, Technip Energies's EBIT dived 16%, over the last year. We think hat kind of performance, if repeated frequently, could well lead to difficulties for the stock. 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 Technip Energies can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Technip Energies 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, Technip Energies actually produced more free cash flow than EBIT. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

While Technip Energies does have more liabilities than liquid assets, it also has net cash of €3.06b. The cherry on top was that in converted 107% of that EBIT to free cash flow, bringing in €934m. So we don't have any problem with Technip Energies's use of debt. Of course, we wouldn't say no to the extra confidence that we'd gain if we knew that Technip Energies insiders have been buying shares: if you're on the same wavelength, you can find out if insiders are buying by clicking this link.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.