Is D-Market Elektronik Hizmetler ve Ticaret (NASDAQ:HEPS) A Risky Investment?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 D-Market Elektronik Hizmetler ve Ticaret A.S. (NASDAQ:HEPS) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

When Is Debt A Problem?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. 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.

See our latest analysis for D-Market Elektronik Hizmetler ve Ticaret

What Is D-Market Elektronik Hizmetler ve Ticaret's Debt?

The image below, which you can click on for greater detail, shows that at March 2024 D-Market Elektronik Hizmetler ve Ticaret had debt of ₺314.6m, up from ₺34.1m in one year. But on the other hand it also has ₺7.97b in cash, leading to a ₺7.65b net cash position.

A Look At D-Market Elektronik Hizmetler ve Ticaret's Liabilities

Zooming in on the latest balance sheet data, we can see that D-Market Elektronik Hizmetler ve Ticaret had liabilities of ₺15.8b due within 12 months and liabilities of ₺836.2m due beyond that. Offsetting this, it had ₺7.97b in cash and ₺3.05b in receivables that were due within 12 months. So it has liabilities totalling ₺5.61b more than its cash and near-term receivables, combined.

Given D-Market Elektronik Hizmetler ve Ticaret has a market capitalization of ₺28.7b, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. While it does have liabilities worth noting, D-Market Elektronik Hizmetler ve Ticaret also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if D-Market Elektronik Hizmetler ve Ticaret can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year D-Market Elektronik Hizmetler ve Ticaret wasn't profitable at an EBIT level, but managed to grow its revenue by 134%, to ₺39b. So there's no doubt that shareholders are cheering for growth

So How Risky Is D-Market Elektronik Hizmetler ve Ticaret?

Although D-Market Elektronik Hizmetler ve Ticaret had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of ₺270m. So when you consider it has net cash, along with the statutory profit, the stock probably isn't as risky as it might seem, at least in the short term. One positive is that D-Market Elektronik Hizmetler ve Ticaret is growing revenue apace, which makes it easier to sell a growth story and raise capital if need be. But that doesn't change our opinion that the stock 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 example, we've discovered 2 warning signs for D-Market Elektronik Hizmetler ve Ticaret (1 is a bit unpleasant!) that you should be aware of before investing here.

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.

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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.

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