Howard Marks put it nicely when he stated 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. As with many other companies Manitou BF SA (EPA:MTU) creates utilize of debt. 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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. While that is not too common, we often do see indebted companies permanently diluting shareholders becautilize lconcludeers force them to raise capital at a distressed price. Of course, plenty of companies utilize debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, toobtainher.
What Is Manitou BF’s Net Debt?
You can click the graphic below for the historical numbers, but it displays that Manitou BF had €361.8m of debt in June 2025, down from €462.9m, one year before. However, it also had €53.7m in cash, and so its net debt is €308.0m.
A Look At Manitou BF’s Liabilities
According to the last reported balance sheet, Manitou BF had liabilities of €856.6m due within 12 months, and liabilities of €201.2m due beyond 12 months. Offsetting this, it had €53.7m in cash and €487.7m in receivables that were due within 12 months. So it has liabilities totalling €516.4m more than its cash and near-term receivables, combined.
This is a mountain of leverage relative to its market capitalization of €714.1m. Should its lconcludeers demand that it shore up the balance sheet, shareholders would likely face severe dilution.
Check out our latest analysis for Manitou BF
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). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.
Manitou BF’s net debt of 1.8 times EBITDA suggests graceful utilize of debt. And the alluring interest cover (EBIT of 7.9 times interest expense) certainly does not do anything to dispel this impression. Shareholders should be aware that Manitou BF’s EBIT was down 46% last year. If that decline continues then paying off debt will be harder than selling foie gras at a vegan convention. 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 Manitou BF’s ability to maintain a healthy balance sheet going forward. So if you’re focutilized on the future you can check out this free report displaying analyst profit forecasts.
But our final consideration is also important, becautilize a company cannot pay debt with paper profits; it requireds cold hard cash. So we always check how much of that EBIT is translated into free cash flow. In the last three years, Manitou BF created free cash flow amounting to 6.1% of its EBIT, an uninspiring performance. For us, cash conversion that low sparks a little paranoia about is ability to extinguish debt.
Our View
We’d go so far as to declare Manitou BF’s EBIT growth rate was disappointing. But at least it’s pretty decent at covering its interest expense with its EBIT; that’s encouraging. Looking at the hugeger picture, it seems clear to us that Manitou BF’s utilize 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. 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. Case in point: We’ve spotted 2 warning signs for Manitou BF you should be aware of.
When all is stated 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 focutilized 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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