Does Roper Technologies (NASDAQ: ROP ) Have a Healthy Balance Sheet?

Table of Contents

• 1 When is debt a problem?
• 2 How Much Debt Does Roper Technologies Have?
• 3 How healthy is Roper Technologies’ balance sheet?
• 4 Our opinion
  • 4.1 Valuation is complicated, but we’re here to make it simple.
• 5 ‍How does Roper Technologies’ approach to managing‌ debt⁢ and‌ cash flow position ‍it for future opportunities or challenges compared to its ​industry peers?

Warren Buffett once said, “Volatility is not synonymous with risk.” So it’s obvious that you have to take debt into account when you think about how risky a particular stock is, because too much debt can sink a company. We note that Information about the company Roper Technologies, Inc.(NASDAQ: ROP) has debt on its balance sheet. But should shareholders be concerned about their use of debt?

When is debt a problem?

Debt is a tool that helps companies grow, but if a company can’t pay its borrowers, it’s at their mercy. An integral part of capitalism is the process of “creative destruction,” in which failed companies are mercilessly liquidated by their bankers. Although this does not happen very often, we often see indebted companies permanently diluting their shareholders as lenders force them to raise capital at a low cost. The advantage of debt, of course, is that it often represents cheap capital, especially when it replaces the dilution of a company with the ability to reinvest at high rates of return. The first step when considering a company’s debt levels is to consider their cash and debt together.

See our latest analysis for Roper Technologies

How Much Debt Does Roper Technologies Have?

You can click on the graphic below to see the historical numbers, but it shows that Roper Technologies had US$8.38 billion in debt as of September 2024, up from US$6.88 billion in year method. However, this compares to US$269.6m in cash, resulting in a net debt of around US$8.11b.

NasdaqGS: ROP Debt to Equity History November 20, 2024

How healthy is Roper Technologies’ balance sheet?

Moving into the most recent balance sheet data, we can see that Roper Technologies had liabilities of US$3.29b payable within 12 months and liabilities of US$9.75b payable. beyond that to be paid. On the other hand, it had US$269.6m in cash and US$994.5m worth of cash to be paid within a year. Its liabilities therefore total US$11.8b more than its cash and short-term gains combined.

Roper Technologies has a very large market capitalization of US$58.8b, so the company could raise money to improve its balance sheet if the need arises. However, it is worth taking a close look at his ability to pay off debt.

To evaluate a company’s debt relative to its revenue, we measure net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA) and earnings before interest and tax (EBIT ) divided by interest expense (interest coverage). So we look at debt versus earnings, both with and without depreciation expense.

With a net debt to EBITDA ratio of 3.0, Roper Technologies has significant debt. However, the high interest coverage ratio of 8.1 suggests that the company can easily service this debt. If Roper Technologies can continue to grow EBIT at the same rate as last year (14%), it will be easier to manage its debt load. Of course, we learn most about debt from the balance sheet. But ultimately, the company’s future profitability will determine whether Roper Technologies can strengthen its balance sheet over time. So if you want to know what the professionals think, maybe this free report on analysts’ earnings forecasts be interesting to you.

After all, the tax office may appreciate the accounting profits, but lenders only accept cold, hard cash. So we always check how much of that EBIT is converted into free cash flow. Over the past three years, Roper Technologies generated free cash flow worth a very solid 93% of its EBIT, more than we would have expected. This puts the company in a good position to reduce debt if that is desirable.

Our opinion

Converting EBIT to free cash flow shows that Roper Technologies can handle its debt as easily as Cristiano Ronaldo can score a goal against an under-14 goalkeeper. However, we are a little concerned about the net debt to EBITDA ratio. If we consider the factors above, it looks like Roper Technologies is managing its debt very wisely. Although this involves some risk, it can also increase returns for shareholders. The balance sheet is clearly the area of ​​focus when analyzing debt. But not all investment risks are in the balance sheet – quite another. we have at Roper Technologies 2 warning signs indicated understanding that should be part of your investment process.

Of course, if you are one of those investors who prefer to buy stocks without debt, you should not be sad today our exclusive list of net cash growth stocks to find

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This article from Simply Wall St is general in nature. We provide opinions based solely on historical data and analyst forecasts, using an unbiased methodology. Our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your goals or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company releases or qualitative products. Wall St simply has no position in any of the stocks mentioned.