Is De'Longhi (BIT:DLG) A Risky Investment?

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 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. As with many other companies De'Longhi S.p.A. (BIT:DLG) makes use of debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does De'Longhi Carry?

You can click the graphic below for the historical numbers, but it shows that De'Longhi had €487.4m of debt in September 2025, down from €639.0m, one year before. But on the other hand it also has €625.6m in cash, leading to a €138.2m net cash position.

How Strong Is De'Longhi's Balance Sheet?

The latest balance sheet data shows that De'Longhi had liabilities of €1.11b due within a year, and liabilities of €691.7m falling due after that. Offsetting these obligations, it had cash of €625.6m as well as receivables valued at €474.8m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €705.7m.

Of course, De'Longhi has a market capitalization of €5.30b, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, De'Longhi boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for De'Longhi

Also good is that De'Longhi grew its EBIT at 19% over the last year, further increasing its ability to manage debt. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if De'Longhi can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While De'Longhi 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. During the last three years, De'Longhi generated free cash flow amounting to a very robust 91% of its EBIT, more than we'd expect. That positions it well to pay down debt if desirable to do so.

Summing Up

Although De'Longhi's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of €138.2m. And it impressed us with free cash flow of €278m, being 91% of its EBIT. So we don't think De'Longhi's use of debt is risky. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 3 warning signs for De'Longhi that you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.