El-Mor Electric Installation & Services (1986) (TLV:ELMR) 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 El-Mor Electric Installation & Services (1986) Ltd. (TLV:ELMR) does use debt in its business. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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 examine debt levels, we first consider both cash and debt levels, together.

What Is El-Mor Electric Installation & Services (1986)'s Net Debt?

As you can see below, El-Mor Electric Installation & Services (1986) had ₪42.3m of debt at March 2025, down from ₪50.9m a year prior. However, it does have ₪102.0m in cash offsetting this, leading to net cash of ₪59.7m.

How Healthy Is El-Mor Electric Installation & Services (1986)'s Balance Sheet?

According to the last reported balance sheet, El-Mor Electric Installation & Services (1986) had liabilities of ₪382.7m due within 12 months, and liabilities of ₪14.9m due beyond 12 months. Offsetting these obligations, it had cash of ₪102.0m as well as receivables valued at ₪337.5m due within 12 months. So it can boast ₪42.0m more liquid assets than total liabilities.

This surplus suggests that El-Mor Electric Installation & Services (1986) has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, El-Mor Electric Installation & Services (1986) boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for El-Mor Electric Installation & Services (1986)

In addition to that, we're happy to report that El-Mor Electric Installation & Services (1986) has boosted its EBIT by 37%, thus reducing the spectre of future debt repayments. There's no doubt that we learn most about debt from the balance sheet. But it is El-Mor Electric Installation & Services (1986)'s earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While El-Mor Electric Installation & Services (1986) 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, El-Mor Electric Installation & Services (1986) recorded free cash flow worth a fulsome 90% of its EBIT, which is stronger than we'd usually expect. That positions it well to pay down debt if desirable to do so.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that El-Mor Electric Installation & Services (1986) has net cash of ₪59.7m, as well as more liquid assets than liabilities. And it impressed us with free cash flow of ₪47m, being 90% of its EBIT. So we don't think El-Mor Electric Installation & Services (1986)'s use of debt is risky. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 1 warning sign for El-Mor Electric Installation & Services (1986) you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.