Does Lincoln Educational Services (NASDAQ:LINC) Have A Healthy Balance Sheet?
Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Lincoln Educational Services Corporation (NASDAQ:LINC) does use debt in its business. But is this debt a concern to shareholders?
What Risk Does Debt Bring?
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. 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. When we examine debt levels, we first consider both cash and debt levels, together.
What Is Lincoln Educational Services's Net Debt?
You can click the graphic below for the historical numbers, but it shows that as of September 2025 Lincoln Educational Services had US$8.00m of debt, an increase on none, over one year. But on the other hand it also has US$13.5m in cash, leading to a US$5.48m net cash position.
A Look At Lincoln Educational Services' Liabilities
We can see from the most recent balance sheet that Lincoln Educational Services had liabilities of US$95.9m falling due within a year, and liabilities of US$185.2m due beyond that. Offsetting these obligations, it had cash of US$13.5m as well as receivables valued at US$52.6m due within 12 months. So its liabilities total US$215.0m more than the combination of its cash and short-term receivables.
This deficit isn't so bad because Lincoln Educational Services is worth US$753.9m, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. While it does have liabilities worth noting, Lincoln Educational Services also has more cash than debt, so we're pretty confident it can manage its debt safely.
See our latest analysis for Lincoln Educational Services
Even more impressive was the fact that Lincoln Educational Services grew its EBIT by 114% over twelve months. If maintained that growth will make the debt even more manageable in the years ahead. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Lincoln Educational Services 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.
Finally, a company can only pay off debt with cold hard cash, not accounting profits. Lincoln Educational Services 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, Lincoln Educational Services burned a lot of cash. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.
Summing Up
Although Lincoln Educational Services's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of US$5.48m. And it impressed us with its EBIT growth of 114% over the last year. So we are not troubled with Lincoln Educational Services's debt use. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. To that end, you should learn about the 2 warning signs we've spotted with Lincoln Educational Services (including 1 which makes us a bit uncomfortable) .
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.