Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. Importantly, LeMaitre Vascular, Inc. (NASDAQ:LMAT) does carry debt. But should shareholders be worried about its use of debt?

When Is Debt Dangerous?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is LeMaitre Vascular's Debt?

You can click the graphic below for the historical numbers, but it shows that as of December 2024 LeMaitre Vascular had US$167.8m of debt, an increase on none, over one year. But on the other hand it also has US$299.7m in cash, leading to a US$132.0m net cash position.

How Healthy Is LeMaitre Vascular's Balance Sheet?

The latest balance sheet data shows that LeMaitre Vascular had liabilities of US$30.6m due within a year, and liabilities of US$183.9m falling due after that. Offsetting this, it had US$299.7m in cash and US$30.1m in receivables that were due within 12 months. So it can boast US$115.3m more liquid assets than total liabilities.

This short term liquidity is a sign that LeMaitre Vascular could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, LeMaitre Vascular boasts net cash, so it's fair to say it does not have a heavy debt load!

In addition to that, we're happy to report that LeMaitre Vascular has boosted its EBIT by 40%, thus reducing the spectre of future debt repayments. 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 LeMaitre Vascular can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While LeMaitre Vascular has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the most recent three years, LeMaitre Vascular recorded free cash flow worth 71% 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.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that LeMaitre Vascular has net cash of US$132.0m, as well as more liquid assets than liabilities. And we liked the look of last year's 40% year-on-year EBIT growth. So we don't think LeMaitre Vascular's use of debt is risky. Another factor that would give us confidence in LeMaitre Vascular would be if insiders have been buying shares: if you're conscious of that signal too, you can find out instantly by clicking this link.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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 using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused 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.