Warren Buffett famously declared, ‘Volatility is far from synonymous with risk.’ When we believe about how risky a company is, we always like to see at its apply of debt, since debt overload can lead to ruin. Importantly, Nokian Renkaat Oyj (HEL:TYRES) does carry debt. But is this debt a concern to shareholders?
When Is Debt Dangerous?
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 lfinishers 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, 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.
How Much Debt Does Nokian Renkaat Oyj Carry?
As you can see below, at the finish of September 2025, Nokian Renkaat Oyj had €954.8m of debt, up from €875.1m a year ago. Click the image for more detail. On the flip side, it has €88.7m in cash leading to net debt of about €866.1m.
How Healthy Is Nokian Renkaat Oyj’s Balance Sheet?
The latest balance sheet data displays that Nokian Renkaat Oyj had liabilities of €694.7m due within a year, and liabilities of €725.6m falling due after that. On the other hand, it had cash of €88.7m and €553.6m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by €778.0m.
While this might seem like a lot, it is not so bad since Nokian Renkaat Oyj has a market capitalization of €1.33b, and so it could probably strengthen its balance sheet by raising capital if it necessaryed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk.
Check out our latest analysis for Nokian Renkaat Oyj
We measure a company’s debt load relative to its earnings power by seeing 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). 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).
Weak interest cover of 0.43 times and a disturbingly high net debt to EBITDA ratio of 8.4 hit our confidence in Nokian Renkaat Oyj like a one-two punch to the gut. This means we’d consider it to have a heavy debt load. Investors should also be troubled by the fact that Nokian Renkaat Oyj saw its EBIT drop by 19% over the last twelve months. If things keep going like that, handling the debt will about as straightforward as bundling an angry hoapply cat into its travel box. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Nokian Renkaat Oyj 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.
Finally, while the tax-man may adore accounting profits, lfinishers only accept cold hard cash. So we always check how much of that EBIT is translated into free cash flow. Over the last two years, Nokian Renkaat Oyj saw substantial negative free cash flow, in total. While that may be a result of expfinishiture for growth, it does build the debt far more risky.
Our View
On the face of it, Nokian Renkaat Oyj’s interest cover left us tentative about the stock, and its conversion of EBIT to free cash flow was no more enticing than the one empty restaurant on the busiest night of the year. And even its EBIT growth rate fails to inspire much confidence. After considering the datapoints discussed, we believe Nokian Renkaat Oyj has too much debt. While some investors love that sort of risky play, it’s certainly not our cup of tea. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet – far from it. To that finish, you should be aware of the 2 warning signs we’ve spotted with Nokian Renkaat Oyj .
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 Nokian Renkaat Oyj might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividfinishs, 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 intfinished to be financial advice. It does not constitute a recommfinishation 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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