Delivery Hero (ETR:DHER) Is Carrying A Fair Bit Of Debt

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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that Delivery Hero SE (ETR:DHER) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

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. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Delivery Hero Carry?

As you can see below, Delivery Hero had €5.13b of debt, at December 2024, which is about the same as the year before. You can click the chart for greater detail. However, because it has a cash reserve of €3.81b, its net debt is less, at about €1.32b.

How Strong Is Delivery Hero's Balance Sheet?

The latest balance sheet data shows that Delivery Hero had liabilities of €3.73b due within a year, and liabilities of €5.98b falling due after that. Offsetting these obligations, it had cash of €3.81b as well as receivables valued at €679.5m due within 12 months. So its liabilities total €5.22b more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of €7.70b, so it does suggest shareholders should keep an eye on Delivery Hero's use of debt. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. 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 Delivery Hero 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.

See our latest analysis for Delivery Hero

Over 12 months, Delivery Hero reported revenue of €12b, which is a gain of 24%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Despite the top line growth, Delivery Hero still had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost €341m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. For example, we would not want to see a repeat of last year's loss of €882m. So to be blunt we do think it is risky. For riskier companies like Delivery Hero I always like to keep an eye on the long term profit and revenue trends. Fortunately, you can click to see our interactive graph of its profit, revenue, and operating cashflow.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.