Is Caesarstone (NASDAQ:CSTE) Using Debt In A Risky Way?

Warren Buffett famously said, '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. Importantly, Caesarstone Ltd. (NASDAQ:CSTE) does carry debt. But should shareholders be worried about its use of debt?

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Why Does Debt Bring Risk?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Caesarstone Carry?

You can click the graphic below for the historical numbers, but it shows that Caesarstone had US$3.91m of debt in June 2025, down from US$6.51m, one year before. But on the other hand it also has US$75.6m in cash, leading to a US$71.7m net cash position.

How Strong Is Caesarstone's Balance Sheet?

The latest balance sheet data shows that Caesarstone had liabilities of US$148.9m due within a year, and liabilities of US$131.4m falling due after that. Offsetting this, it had US$75.6m in cash and US$132.3m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$72.3m.

When you consider that this deficiency exceeds the company's US$53.9m market capitalization, you might well be inclined to review the balance sheet intently. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. Caesarstone boasts net cash, so it's fair to say it does not have a heavy debt load, even if it does have very significant liabilities, in total. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Caesarstone's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

See 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$406m. To be frank that doesn't bode well.

So How Risky Is Caesarstone?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Caesarstone had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of US$23m and booked a US$56m accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of US$71.7m. 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. 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 2 warning signs for Caesarstone (of which 1 is significant!) you should know about.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.