The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. We note that NIKE, Inc. (NYSE:NKE) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.
Why Does Debt Bring Risk?
Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. 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 think about a company's use of debt, we first look at cash and debt together.
See our latest analysis for NIKE
How Much Debt Does NIKE Carry?
The chart below, which you can click on for greater detail, shows that NIKE had US$9.43b in debt in May 2022; about the same as the year before. But it also has US$13.0b in cash to offset that, meaning it has US$3.57b net cash.
NYSE:NKE Debt to Equity History August 3rd 2022
How Healthy Is NIKE's Balance Sheet?
According to the last reported balance sheet, NIKE had liabilities of US$10.7b due within 12 months, and liabilities of US$14.3b due beyond 12 months. Offsetting this, it had US$13.0b in cash and US$4.67b in receivables that were due within 12 months. So it has liabilities totalling US$7.38b more than its cash and near-term receivables, combined.
Given NIKE has a humongous market capitalization of US$175.3b, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, NIKE boasts net cash, so it's fair to say it does not have a heavy debt load!
But the other side of the story is that NIKE saw its EBIT decline by 7.7% over the last year. That sort of decline, if sustained, will obviously make debt harder to handle. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine NIKE's ability to maintain a healthy balance sheet going forward. 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. NIKE may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the most recent three years, NIKE recorded free cash flow worth 69% 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
We could understand if investors are concerned about NIKE's liabilities, but we can be reassured by the fact it has has net cash of US$3.57b. And it impressed us with free cash flow of US$4.4b, being 69% of its EBIT. So we are not troubled with NIKE's debt use. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of NIKE's earnings per share history for free.
When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
伯克希爾哈撒韋的外部基金經理理想汽車·盧直言不諱地説,最大的投資風險不是價格的波動,而是你是否會遭受永久性的資本損失。當你考察一家公司的風險有多大時,考慮它的資產負債表是很自然的,因為當一家企業倒閉時,債務往往會涉及到它。我們注意到耐克公司(紐約證券交易所股票代碼:NKE)的資產負債表上確實有債務。但真正的問題是,這筆債務是否讓該公司面臨風險。
為什麼債務會帶來風險?
債務幫助企業,直到企業難以償還債務,無論是用新資本還是用自由現金流。資本主義的一部分是“創造性破壞”的過程,破產的企業被銀行家無情地清算。然而,更常見(但代價仍然高昂)的情況是,一家公司必須以極低的價格發行股票,永久性地稀釋股東的股份,只是為了支撐其資產負債表。當然,債務的好處是,它往往代表着廉價資本,特別是當它用能夠以高回報率進行再投資的能力取代公司的稀釋時。當我們考慮一家公司的債務用途時,我們首先會把現金和債務放在一起看。
查看我們對耐克的最新分析
耐克揹負着多少債務?
下面的圖表顯示,耐克在2022年5月的債務為94.3億美元,與前一年大致相同。你可以點擊查看更多細節。但它也有130億美元的現金來抵消,這意味着它有35.7億美元的淨現金。
紐約證券交易所:NKE債轉股歷史2022年8月3日
耐克的資產負債表有多健康?
根據最新報告的資產負債表,耐克有107億美元的負債在12個月內到期,143億美元的負債在12個月後到期。作為抵消,它有130億美元的現金和46.7億美元的應收賬款在12個月內到期。因此,它的負債總額比現金和近期應收賬款加起來還要多73.8億美元。
考慮到耐克擁有1753億美元的龐大市值,很難相信這些債務會構成太大的威脅。但有足夠的負債,我們肯定會建議股東繼續監控未來的資產負債表。儘管耐克有值得注意的負債,但它擁有淨現金,所以公平地説,它沒有沉重的債務負擔!
但另一方面,耐克去年的息税前利潤下降了7.7%。這種下降,如果持續下去,顯然會使債務更難處理。在分析債務水平時,資產負債表顯然是一個起點。但最重要的是,未來的收益將決定耐克未來能否保持健康的資產負債表。所以,如果你關注未來,你可以看看這個免費顯示分析師利潤預測的報告。
最後,儘管税務人員可能喜歡會計利潤,但貸款人只接受冷硬現金。耐克的資產負債表上可能有淨現金,但看看該業務將息税前利潤(EBIT)轉換為自由現金流的情況仍很有趣,因為這將影響其對債務的需求和管理債務的能力。在最近三年裏,耐克錄得的自由現金流相當於其息税前利潤的69%,考慮到自由現金流不包括利息和税收,這一數字接近正常。這種冷酷的現金意味着,它可以在想要的時候減少債務。
總結
如果投資者擔心耐克的債務,我們可以理解,但我們可以放心的是,耐克擁有35.7億美元的淨現金。它給我們留下了深刻的印象,自由現金流為44億美元,佔其息税前利潤的69%。因此,我們並不擔心耐克的債務問題。在大多數其他指標中,我們認為跟蹤每股收益的增長速度(如果有的話)是很重要的。如果你也意識到了這一點,那麼你就幸運了,因為今天你可以免費查看耐克每股收益歷史的互動圖表。
總而言之,有時候專注於甚至不需要債務的公司會更容易。讀者可以訪問淨債務為零的成長型股票列表100%免費,現在。
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本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。