Would Meshek Energy - Renewable Energies (TLV:MSKE) Be Better Off With Less Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Meshek Energy - Renewable Energies Ltd. (TLV:MSKE) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Meshek Energy - Renewable Energies Carry?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Meshek Energy - Renewable Energies had ₪1.48b of debt, an increase on ₪952.3m, over one year. However, it also had ₪395.3m in cash, and so its net debt is ₪1.08b.

A Look At Meshek Energy - Renewable Energies' Liabilities

The latest balance sheet data shows that Meshek Energy - Renewable Energies had liabilities of ₪515.7m due within a year, and liabilities of ₪1.24b falling due after that. Offsetting this, it had ₪395.3m in cash and ₪58.8m in receivables that were due within 12 months. So it has liabilities totalling ₪1.30b more than its cash and near-term receivables, combined.

While this might seem like a lot, it is not so bad since Meshek Energy - Renewable Energies has a market capitalization of ₪4.64b, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Meshek Energy - Renewable Energies 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 Meshek Energy - Renewable Energies

Over 12 months, Meshek Energy - Renewable Energies reported revenue of ₪121m, which is a gain of 35%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Despite the top line growth, Meshek Energy - Renewable Energies still had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at ₪20m. 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. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through ₪163m of cash over the last year. So to be blunt we think it is 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. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Meshek Energy - Renewable Energies you should know about.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.