These 4 Measures Indicate That PORR (VIE:POS) Is Using Debt Reasonably Well

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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, PORR AG (VIE:POS) does carry debt. But is this debt a concern to shareholders?

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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 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does PORR Carry?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 PORR had €277.1m of debt, an increase on €198.6m, over one year. However, it does have €344.2m in cash offsetting this, leading to net cash of €67.1m.

A Look At PORR's Liabilities

Zooming in on the latest balance sheet data, we can see that PORR had liabilities of €2.83b due within 12 months and liabilities of €740.0m due beyond that. On the other hand, it had cash of €344.2m and €2.07b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by €1.16b.

This deficit is considerable relative to its market capitalization of €1.30b, so it does suggest shareholders should keep an eye on PORR's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. While it does have liabilities worth noting, PORR also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for PORR

Pleasingly, PORR is growing its EBIT faster than former Australian PM Bob Hawke downs a yard glass, boasting a 198% gain in the last twelve months. 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 PORR 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. PORR 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. Over the last three years, PORR actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

Although PORR's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of €67.1m. The cherry on top was that in converted 225% of that EBIT to free cash flow, bringing in €152m. So we are not troubled with PORR's debt use. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. Be aware that PORR is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.