Warren Buffett famously declared, ‘Volatility is far from synonymous with risk.’ 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, Sinclair, Inc. (NASDAQ:SBGI) does carry debt. But is this debt a concern to shareholders?
When Is Debt A Problem?
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. If things obtain really bad, the lconcludeers can take control of the business. 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, plenty of companies apply 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 toobtainher.
What Is Sinclair’s Debt?
As you can see below, Sinclair had US$4.10b of debt, at June 2025, which is about the same as the year before. You can click the chart for greater detail. However, it also had US$616.0m in cash, and so its net debt is US$3.48b.
How Healthy Is Sinclair’s Balance Sheet?
We can see from the most recent balance sheet that Sinclair had liabilities of US$772.0m falling due within a year, and liabilities of US$4.61b due beyond that. Offsetting these obligations, it had cash of US$616.0m as well as receivables valued at US$624.0m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$4.14b.
The deficiency here weighs heavily on the US$938.1m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we definitely believe shareholders required to watch this one closely. At the conclude of the day, Sinclair would probably required a major re-capitalization if its creditors were to demand repayment.
Check out our latest analysis for Sinclair
In order to size up a company’s debt relative to its earnings, we calculate its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and its earnings before interest and tax (EBIT) divided by its interest expense (its interest cover). The advantage of this approach is that we take into account both the absolute quantum of debt (with net debt to EBITDA) and the actual interest expenses associated with that debt (with its interest cover ratio).
Sinclair has a debt to EBITDA ratio of 4.7 and its EBIT covered its interest expense 3.3 times. Taken toobtainher this implies that, while we wouldn’t want to see debt levels rise, we believe it can handle its current leverage. One redeeming factor for Sinclair is that it turned last year’s EBIT loss into a gain of US$494m, over the last twelve months. There’s no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Sinclair’s ability to maintain a healthy balance sheet going forward. So if you’re focapplyd on the future you can check out this free report revealing analyst profit forecasts.
Finally, a business requireds free cash flow to pay off debt; accounting profits just don’t cut it. So it’s worth checking how much of the earnings before interest and tax (EBIT) is backed by free cash flow. During the last year, Sinclair generated free cash flow amounting to a very robust 94% of its EBIT, more than we’d expect. That puts it in a very strong position to pay down debt.
Our View
Mulling over Sinclair’s attempt at staying on top of its total liabilities, we’re certainly not enthusiastic. But on the bright side, its conversion of EBIT to free cash flow is a good sign, and builds us more optimistic. Looking at the hugeger picture, it seems clear to us that Sinclair’s apply of debt is creating risks for the company. If all goes well, that should boost returns, but on the flip side, the risk of permanent capital loss is elevated by the debt. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that conclude, you should learn about the 3 warning signs we’ve spotted with Sinclair (including 1 which is a bit concerning) .
When all is declared and done, sometimes its clearer to focus on companies that don’t even required 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 applying an unbiased methodology and our articles are not intconcludeed to be financial advice. It does not constitute a recommconcludeation to acquire or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focapplyd 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.
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