Here's Why Thirdeye Systems (TLV:THES) Can Afford Some 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. We note that Thirdeye Systems Ltd (TLV:THES) does have debt on its balance sheet. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

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. 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. 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.

What Is Thirdeye Systems's Debt?

As you can see below, Thirdeye Systems had ₪5.81m of debt at June 2025, down from ₪7.06m a year prior. However, because it has a cash reserve of ₪938.0k, its net debt is less, at about ₪4.87m.

A Look At Thirdeye Systems' Liabilities

According to the last reported balance sheet, Thirdeye Systems had liabilities of ₪17.0m due within 12 months, and liabilities of ₪1.66m due beyond 12 months. Offsetting these obligations, it had cash of ₪938.0k as well as receivables valued at ₪18.8m due within 12 months. So it can boast ₪1.04m more liquid assets than total liabilities.

This state of affairs indicates that Thirdeye Systems' balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the ₪77.4m company is short on cash, but still worth keeping an eye on the balance sheet. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Thirdeye Systems will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

View our latest analysis for Thirdeye Systems

Over 12 months, Thirdeye Systems made a loss at the EBIT level, and saw its revenue drop to ₪18m, which is a fall of 2.6%. We would much prefer see growth.

Caveat Emptor

Over the last twelve months Thirdeye Systems produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable ₪9.1m at the EBIT level. Looking on the brighter side, the business has adequate liquid assets, which give it time to grow and develop before its debt becomes a near-term issue. Still, we'd be more encouraged to study the business in depth if it already had some free cash flow. So it seems too risky for our taste. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 3 warning signs for Thirdeye Systems (1 is concerning!) that you should be aware of before investing here.

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.