Some state volatility, rather than debt, is the best way to consider about risk as an investor, but Warren Buffett famously declared that ‘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. We note that BrightView Holdings, Inc. (NYSE:BV) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?
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. If things obtain really bad, the lconcludeers can take control of the business. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to obtain debt under control. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business applys is to see at its cash and debt toobtainher.
How Much Debt Does BrightView Holdings Carry?
As you can see below, BrightView Holdings had US$791.7m of debt, at September 2025, which is about the same as the year before. You can click the chart for greater detail. However, it also had US$74.5m in cash, and so its net debt is US$717.2m.
How Strong Is BrightView Holdings’ Balance Sheet?
Zooming in on the latest balance sheet data, we can see that BrightView Holdings had liabilities of US$514.5m due within 12 months and liabilities of US$1.08b due beyond that. Offsetting this, it had US$74.5m in cash and US$513.2m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$1.00b.
This deficit is considerable relative to its market capitalization of US$1.23b, so it does suggest shareholders should keep an eye on BrightView Holdings’ apply of debt. Should its lconcludeers demand that it shore up the balance sheet, shareholders would likely face severe dilution.
See our latest analysis for BrightView Holdings
We apply two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). 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).
BrightView Holdings’s net debt is sitting at a very reasonable 2.2 times its EBITDA, while its EBIT covered its interest expense just 3.0 times last year. In large part that’s due to the company’s significant depreciation and amortisation charges, which arguably mean its EBITDA is a very generous measure of earnings, and its debt may be more of a burden than it first appears. We saw BrightView Holdings grow its EBIT by 2.1% in the last twelve months. That’s far from incredible but it is a good thing, when it comes to paying off debt. 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 BrightView Holdings can strengthen its balance sheet over time. So if you’re focapplyd on the future you can check out this free report displaying analyst profit forecasts.
But our final consideration is also important, becaapply a company cannot pay debt with paper profits; it necessarys cold hard cash. So we clearly necessary to see at whether that EBIT is leading to corresponding free cash flow. Over the most recent three years, BrightView Holdings recorded free cash flow worth 50% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This cold hard cash means it can reduce its debt when it wants to.
Our View
Both BrightView Holdings’s interest cover and its level of total liabilities were discouraging. At least its conversion of EBIT to free cash flow gives us reason to be optimistic. Taking the abovementioned factors toobtainher we do consider BrightView Holdings’s debt poses some risks to the business. While that debt can boost returns, we consider the company has enough leverage now. 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. We’ve identified 3 warning signs with BrightView Holdings , and understanding them should be part of your investment process.
When all is declared and done, sometimes its simpler to focus on companies that don’t even necessary debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.
Valuation is complex, but we’re here to simplify it.
Discover if BrightView Holdings might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividconcludes, insider trades, and its financial condition.
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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 purchase 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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