Is Bilfinger (ETR:GBF) Using Too Much Debt?

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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, Bilfinger SE (ETR:GBF) does carry debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Bilfinger Carry?

As you can see below, Bilfinger had €369.0m of debt, at June 2025, which is about the same as the year before. You can click the chart for greater detail. But it also has €430.2m in cash to offset that, meaning it has €61.2m net cash.

A Look At Bilfinger's Liabilities

We can see from the most recent balance sheet that Bilfinger had liabilities of €1.71b falling due within a year, and liabilities of €489.7m due beyond that. Offsetting this, it had €430.2m in cash and €1.40b in receivables that were due within 12 months. So it has liabilities totalling €367.3m more than its cash and near-term receivables, combined.

Of course, Bilfinger has a market capitalization of €3.95b, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Bilfinger boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Bilfinger

The good news is that Bilfinger has increased its EBIT by 8.9% over twelve months, which should ease any concerns about debt repayment. 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 Bilfinger'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, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Bilfinger 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, Bilfinger recorded free cash flow worth a fulsome 89% 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

We could understand if investors are concerned about Bilfinger's liabilities, but we can be reassured by the fact it has has net cash of €61.2m. The cherry on top was that in converted 89% of that EBIT to free cash flow, bringing in €293m. So we don't think Bilfinger's use of debt is risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. We've identified 1 warning sign with Bilfinger , and understanding them should be part of your investment process.

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.

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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.