Health Check: How Prudently Does Doral Group Renewable Energy Resources (TLV:DORL) Use Debt?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the 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. Importantly, Doral Group Renewable Energy Resources Ltd (TLV:DORL) does carry debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Doral Group Renewable Energy Resources's Net Debt?

As you can see below, at the end of March 2025, Doral Group Renewable Energy Resources had ₪3.67b of debt, up from ₪2.07b a year ago. Click the image for more detail. However, because it has a cash reserve of ₪645.0m, its net debt is less, at about ₪3.02b.

A Look At Doral Group Renewable Energy Resources' Liabilities

The latest balance sheet data shows that Doral Group Renewable Energy Resources had liabilities of ₪685.4m due within a year, and liabilities of ₪3.51b falling due after that. Offsetting these obligations, it had cash of ₪645.0m as well as receivables valued at ₪342.0m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₪3.21b.

When you consider that this deficiency exceeds the company's ₪2.80b market capitalization, you might well be inclined to review the balance sheet intently. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Doral Group Renewable Energy Resources 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.

See our latest analysis for Doral Group Renewable Energy Resources

In the last year Doral Group Renewable Energy Resources wasn't profitable at an EBIT level, but managed to grow its revenue by 198%, to ₪357m. So there's no doubt that shareholders are cheering for growth

Caveat Emptor

Despite the top line growth, Doral Group Renewable Energy Resources still had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at ₪105m. When we look at that alongside the significant liabilities, we're not particularly confident about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. Not least because it had negative free cash flow of ₪921m over the last twelve months. So suffice it to say we consider the stock to be risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example - Doral Group Renewable Energy Resources has 2 warning signs we think 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.