Alony-Hetz Properties & Investments (TLV:ALHE) Seems To Be Using A Lot Of Debt

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that Alony-Hetz Properties & Investments Ltd (TLV:ALHE) 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. 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. 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.

How Much Debt Does Alony-Hetz Properties & Investments Carry?

The image below, which you can click on for greater detail, shows that at September 2025 Alony-Hetz Properties & Investments had debt of ₪28.1b, up from ₪21.8b in one year. However, it also had ₪2.02b in cash, and so its net debt is ₪26.1b.

How Healthy Is Alony-Hetz Properties & Investments' Balance Sheet?

The latest balance sheet data shows that Alony-Hetz Properties & Investments had liabilities of ₪5.08b due within a year, and liabilities of ₪29.5b falling due after that. Offsetting these obligations, it had cash of ₪2.02b as well as receivables valued at ₪652.2m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₪31.9b.

The deficiency here weighs heavily on the ₪8.52b company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we'd watch its balance sheet closely, without a doubt. After all, Alony-Hetz Properties & Investments would likely require a major re-capitalisation if it had to pay its creditors today.

Check out our latest analysis for Alony-Hetz Properties & Investments

We measure a company's debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.

With a net debt to EBITDA ratio of 16.8, it's fair to say Alony-Hetz Properties & Investments does have a significant amount of debt. However, its interest coverage of 2.7 is reasonably strong, which is a good sign. The silver lining is that Alony-Hetz Properties & Investments grew its EBIT by 2,306% last year, which nourishing like the idealism of youth. If that earnings trend continues it will make its debt load much more manageable in the future. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Alony-Hetz Properties & Investments 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. So we always check how much of that EBIT is translated into free cash flow. Over the last two years, Alony-Hetz Properties & Investments saw substantial negative free cash flow, in total. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.

Our View

On the face of it, Alony-Hetz Properties & Investments's conversion of EBIT to free cash flow left us tentative about the stock, and its level of total liabilities was no more enticing than the one empty restaurant on the busiest night of the year. But on the bright side, its EBIT growth rate is a good sign, and makes us more optimistic. Overall, it seems to us that Alony-Hetz Properties & Investments's balance sheet is really quite a risk to the business. So we're almost as wary of this stock as a hungry kitten is about falling into its owner's fish pond: once bitten, twice shy, as they say. 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. For example, we've discovered 4 warning signs for Alony-Hetz Properties & Investments (3 are concerning!) that you should be aware of before investing here.

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.