Does Per Aarsleff Holding (CPH:PAAL B) Have A Healthy Balance Sheet?
David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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. Importantly, Per Aarsleff Holding A/S (CPH:PAAL B) does carry debt. But is this debt a concern to shareholders?
When Is Debt A Problem?
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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
How Much Debt Does Per Aarsleff Holding Carry?
You can click the graphic below for the historical numbers, but it shows that as of June 2025 Per Aarsleff Holding had kr.1.28b of debt, an increase on kr.914.0m, over one year. However, it does have kr.1.60b in cash offsetting this, leading to net cash of kr.320.0m.
How Strong Is Per Aarsleff Holding's Balance Sheet?
The latest balance sheet data shows that Per Aarsleff Holding had liabilities of kr.7.36b due within a year, and liabilities of kr.2.70b falling due after that. Offsetting these obligations, it had cash of kr.1.60b as well as receivables valued at kr.7.67b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by kr.785.0m.
Given Per Aarsleff Holding has a market capitalization of kr.14.1b, 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. While it does have liabilities worth noting, Per Aarsleff Holding also has more cash than debt, so we're pretty confident it can manage its debt safely.
View our latest analysis for Per Aarsleff Holding
While Per Aarsleff Holding doesn't seem to have gained much on the EBIT line, at least earnings remain stable for now. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Per Aarsleff Holding'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 company can only pay off debt with cold hard cash, not accounting profits. While Per Aarsleff Holding 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, Per Aarsleff Holding recorded free cash flow worth a fulsome 94% 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 Per Aarsleff Holding's liabilities, but we can be reassured by the fact it has has net cash of kr.320.0m. The cherry on top was that in converted 94% of that EBIT to free cash flow, bringing in kr.1.1b. So we don't think Per Aarsleff Holding's use of debt is risky. Over time, share prices tend to follow earnings per share, so if you're interested in Per Aarsleff Holding, you may well want to click here to check an interactive graph of its earnings per share history.
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.