Does Caesarstone (NASDAQ:CSTE) Have A Healthy Balance Sheet?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. We note that Caesarstone Ltd. (NASDAQ:CSTE) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

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. 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.

How Much Debt Does Caesarstone Carry?

The image below, which you can click on for greater detail, shows that Caesarstone had debt of US$4.20m at the end of March 2025, a reduction from US$7.43m over a year. But on the other hand it also has US$88.8m in cash, leading to a US$84.6m net cash position.

How Strong Is Caesarstone's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Caesarstone had liabilities of US$151.6m due within 12 months and liabilities of US$126.3m due beyond that. Offsetting these obligations, it had cash of US$88.8m as well as receivables valued at US$131.9m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$57.2m.

This is a mountain of leverage relative to its market capitalization of US$60.1m. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. Despite its noteworthy liabilities, Caesarstone boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Caesarstone 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.

Check out our latest analysis for Caesarstone

In the last year Caesarstone had a loss before interest and tax, and actually shrunk its revenue by 20%, to US$424m. That makes us nervous, to say the least.

So How Risky Is Caesarstone?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that Caesarstone had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through US$1.3m of cash and made a loss of US$47m. But the saving grace is the US$84.6m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 2 warning signs for Caesarstone (1 doesn't sit too well with us) 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.