Is Danel (Adir Yeoshua) (TLV:DANE) 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. We can see that Danel (Adir Yeoshua) Ltd (TLV:DANE) does use debt in its business. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Danel (Adir Yeoshua)'s Net Debt?

You can click the graphic below for the historical numbers, but it shows that Danel (Adir Yeoshua) had ₪93.1m of debt in March 2025, down from ₪116.7m, one year before. However, its balance sheet shows it holds ₪218.6m in cash, so it actually has ₪125.5m net cash.

A Look At Danel (Adir Yeoshua)'s Liabilities

We can see from the most recent balance sheet that Danel (Adir Yeoshua) had liabilities of ₪544.0m falling due within a year, and liabilities of ₪311.1m due beyond that. Offsetting this, it had ₪218.6m in cash and ₪489.3m in receivables that were due within 12 months. So its liabilities total ₪147.2m more than the combination of its cash and short-term receivables.

Of course, Danel (Adir Yeoshua) has a market capitalization of ₪2.57b, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, Danel (Adir Yeoshua) boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Danel (Adir Yeoshua)

Also good is that Danel (Adir Yeoshua) grew its EBIT at 17% over the last year, further increasing its ability to manage 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 Danel (Adir Yeoshua) 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.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While Danel (Adir Yeoshua) 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, Danel (Adir Yeoshua) actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

We could understand if investors are concerned about Danel (Adir Yeoshua)'s liabilities, but we can be reassured by the fact it has has net cash of ₪125.5m. The cherry on top was that in converted 104% of that EBIT to free cash flow, bringing in ₪192m. So we don't think Danel (Adir Yeoshua)'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 Danel (Adir Yeoshua) you should be aware of.

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.