Is Solaer Renewable Energies (TLV:SOLR) Weighed On By Its Debt Load?

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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Solaer Renewable Energies Ltd (TLV:SOLR) does carry debt. But the more important question is: how much risk is that debt creating?

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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. If things get really bad, the lenders can take control of the business. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Solaer Renewable Energies's Debt?

As you can see below, Solaer Renewable Energies had ₪842.5m of debt, at March 2025, which is about the same as the year before. You can click the chart for greater detail. However, because it has a cash reserve of ₪112.3m, its net debt is less, at about ₪730.3m.

How Healthy Is Solaer Renewable Energies' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Solaer Renewable Energies had liabilities of ₪556.4m due within 12 months and liabilities of ₪878.6m due beyond that. Offsetting these obligations, it had cash of ₪112.3m as well as receivables valued at ₪67.9m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₪1.25b.

This deficit casts a shadow over the ₪632.7m company, like a colossus towering over mere mortals. So we definitely think shareholders need to watch this one closely. At the end of the day, Solaer Renewable Energies would probably need a major re-capitalization if its creditors were to demand repayment. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Solaer Renewable Energies's earnings that will influence how the balance sheet holds up in the future. 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 Solaer Renewable Energies

In the last year Solaer Renewable Energies wasn't profitable at an EBIT level, but managed to grow its revenue by 139%, to ₪114m. So its pretty obvious shareholders are hoping for more growth!

Caveat Emptor

Despite the top line growth, Solaer 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 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 ₪160m over the last twelve months. That means it's on the risky side of things. 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. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for Solaer Renewable Energies you should know about.

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.