Is CDW Holding (SGX:BXE) Using Too Much 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. As with many other companies CDW Holding Limited (SGX:BXE) makes use of debt. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

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. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is CDW Holding's Net Debt?

As you can see below, at the end of June 2025, CDW Holding had US$4.18m of debt, up from US$3.21m a year ago. Click the image for more detail. But on the other hand it also has US$25.7m in cash, leading to a US$21.5m net cash position.

How Healthy Is CDW Holding's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that CDW Holding had liabilities of US$30.4m due within 12 months and liabilities of US$2.40m due beyond that. Offsetting this, it had US$25.7m in cash and US$17.5m in receivables that were due within 12 months. So it actually has US$10.4m more liquid assets than total liabilities.

This luscious liquidity implies that CDW Holding's balance sheet is sturdy like a giant sequoia tree. Having regard to this fact, we think its balance sheet is as strong as an ox. Simply put, the fact that CDW Holding has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is CDW Holding's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for CDW Holding

Over 12 months, CDW Holding made a loss at the EBIT level, and saw its revenue drop to US$85m, which is a fall of 11%. We would much prefer see growth.

So How Risky Is CDW Holding?

While CDW Holding lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$6.8m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. When analysing debt levels, the balance sheet is the obvious place to start. 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 3 warning signs for CDW Holding (of which 1 is potentially serious!) 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.