Is HelloFresh (ETR:HFG) Using Too Much Debt?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. Importantly, HelloFresh SE (ETR:HFG) does carry debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is HelloFresh's Debt?

As you can see below, HelloFresh had €178.5m of debt at September 2025, down from €186.2m a year prior. But it also has €321.3m in cash to offset that, meaning it has €142.8m net cash.

How Healthy Is HelloFresh's Balance Sheet?

We can see from the most recent balance sheet that HelloFresh had liabilities of €869.0m falling due within a year, and liabilities of €694.8m due beyond that. Offsetting this, it had €321.3m in cash and €20.0m in receivables that were due within 12 months. So it has liabilities totalling €1.22b more than its cash and near-term receivables, combined.

When you consider that this deficiency exceeds the company's €871.5m market capitalization, you might well be inclined to review the balance sheet intently. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. Given that HelloFresh has more cash than debt, we're pretty confident it can handle its debt, despite the fact that it has a lot of liabilities in total.

View our latest analysis for HelloFresh

Notably, HelloFresh made a loss at the EBIT level, last year, but improved that to positive EBIT of €14m in the last twelve months. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine HelloFresh's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While HelloFresh 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. Happily for any shareholders, HelloFresh actually produced more free cash flow than EBIT over the last year. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

Although HelloFresh's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of €142.8m. And it impressed us with free cash flow of €214m, being 1,516% of its EBIT. So although we see some areas for improvement, we're not too worried about HelloFresh's balance sheet. Even though HelloFresh lost money on the bottom line, its positive EBIT suggests the business itself has potential. So you might want to check out how earnings have been trending over the last few years.

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.

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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.