Is RoboGroup T.E.K (TLV:ROBO) A Risky Investment?

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 can see that RoboGroup T.E.K. Ltd. (TLV:ROBO) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does RoboGroup T.E.K Carry?

The image below, which you can click on for greater detail, shows that at June 2025 RoboGroup T.E.K had debt of US$4.01m, up from US$3.61m in one year. However, it does have US$1.04m in cash offsetting this, leading to net debt of about US$2.97m.

A Look At RoboGroup T.E.K's Liabilities

Zooming in on the latest balance sheet data, we can see that RoboGroup T.E.K had liabilities of US$9.90m due within 12 months and liabilities of US$4.16m due beyond that. Offsetting these obligations, it had cash of US$1.04m as well as receivables valued at US$5.76m due within 12 months. So it has liabilities totalling US$7.27m more than its cash and near-term receivables, combined.

RoboGroup T.E.K has a market capitalization of US$15.6m, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since RoboGroup T.E.K will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for RoboGroup T.E.K

In the last year RoboGroup T.E.K had a loss before interest and tax, and actually shrunk its revenue by 17%, to US$8.9m. We would much prefer see growth.

Caveat Emptor

Not only did RoboGroup T.E.K's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Indeed, it lost a very considerable US$4.4m 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. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through US$720k of cash over the last year. So suffice it to say we do consider the stock to be 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. Be aware that RoboGroup T.E.K is showing 4 warning signs in our investment analysis , and 2 of those are a bit unpleasant...

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.