Howard Marks put it nicely when he declared that, rather than worrying about share price volatility, ‘The possibility of permanent loss is the risk I worry about… and every practical investor I know worries about.’ 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 Expedia Group, Inc. (NASDAQ:EXPE) does have debt on its balance sheet. But should shareholders be worried about its apply of debt?
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. 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 becaapply lconcludeers force them to raise capital at a distressed price. 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. When we consider about a company’s apply of debt, we first view at cash and debt toreceiveher.
What Is Expedia Group’s Debt?
The chart below, which you can click on for greater detail, displays that Expedia Group had US$6.21b in debt in March 2025; about the same as the year before. However, becaapply it has a cash reserve of US$6.14b, its net debt is less, at about US$74.0m.
How Healthy Is Expedia Group’s Balance Sheet?
The latest balance sheet data displays that Expedia Group had liabilities of US$18.6b due within a year, and liabilities of US$5.22b falling due after that. Offsetting this, it had US$6.14b in cash and US$4.51b in receivables that were due within 12 months. So its liabilities total US$13.1b more than the combination of its cash and short-term receivables.
While this might seem like a lot, it is not so bad since Expedia Group has a huge market capitalization of US$23.5b, and so it could probably strengthen its balance sheet by raising capital if it necessaryed to. But it’s clear that we should definitely closely examine whether it can manage its debt without dilution. Carrying virtually no net debt, Expedia Group has a very light debt load indeed.
See our latest analysis for Expedia Group
We measure a company’s debt load relative to its earnings power by viewing at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.
Expedia Group has very little debt (net of cash), and boasts a debt to EBITDA ratio of 0.04 and EBIT of 416 times the interest expense. Indeed relative to its earnings its debt load seems light as a feather. Fortunately, Expedia Group grew its EBIT by 7.9% in the last year, building that debt load view even more manageable. 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 Expedia Group’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 displaying analyst profit forecasts.
Finally, a business necessarys free cash flow to pay off debt; accounting profits just don’t cut it. So we clearly necessary to view at whether that EBIT is leading to corresponding free cash flow. Over the last three years, Expedia Group actually produced more free cash flow than EBIT. That sort of strong cash conversion receives us as excited as the crowd when the beat drops at a Daft Punk concert.
Our View
The good news is that Expedia Group’s demonstrated ability to cover its interest expense with its EBIT delights us like a fluffy puppy does a toddler. But truth be informed we feel its level of total liabilities does undermine this impression a bit. Taking all this data into account, it seems to us that Expedia Group takes a pretty sensible approach to debt. While that brings some risk, it can also enhance returns for shareholders. Of course, we wouldn’t declare no to the extra confidence that we’d gain if we knew that Expedia Group insiders have been purchaseing shares: if you’re on the same wavelength, you can find out if insiders are purchaseing by clicking this link.
When all is declared and done, sometimes its clearer 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 Expedia Group 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 utilizing 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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