ManTech International (NASDAQ:MANT) Has A Rock Solid Balance Sheet
Howard Marks put it nicely when he said 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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that ManTech International Corporation (NASDAQ:MANT) does use debt in its business. But the more important question is: how much risk is that debt creating?
What Risk Does Debt Bring?
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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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.
See our latest analysis for ManTech International
How Much Debt Does ManTech International Carry?
As you can see below, at the end of June 2021, ManTech International had US$30.0m of debt, up from US$20.0m a year ago. Click the image for more detail. But on the other hand it also has US$64.9m in cash, leading to a US$34.9m net cash position.
A Look At ManTech International's Liabilities
Zooming in on the latest balance sheet data, we can see that ManTech International had liabilities of US$367.3m due within 12 months and liabilities of US$292.6m due beyond that. Offsetting this, it had US$64.9m in cash and US$475.6m in receivables that were due within 12 months. So it has liabilities totalling US$119.5m more than its cash and near-term receivables, combined.
Of course, ManTech International has a market capitalization of US$3.15b, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, ManTech International boasts net cash, so it's fair to say it does not have a heavy debt load!
The good news is that ManTech International has increased its EBIT by 9.6% over twelve months, which should ease any concerns about debt repayment. 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 ManTech International'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.
But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While ManTech International 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 last three years, ManTech International recorded free cash flow worth a fulsome 92% of its EBIT, which is stronger than we'd usually expect. That puts it in a very strong position to pay down debt.
Summing up
We could understand if investors are concerned about ManTech International's liabilities, but we can be reassured by the fact it has has net cash of US$34.9m. And it impressed us with free cash flow of US$152m, being 92% of its EBIT. So we don't think ManTech International's use of debt is risky. 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. Case in point: We've spotted 1 warning sign for ManTech International you should be aware of.
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.
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.
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