Is D-Market Elektronik Hizmetler ve Ticaret (NASDAQ:HEPS) Using Debt In A Risky Way?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that D-Market Elektronik Hizmetler ve Ticaret A.S. (NASDAQ:HEPS) does use debt in its business. But the more important question is: how much risk is that debt creating?

When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. 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

How Much Debt Does D-Market Elektronik Hizmetler ve Ticaret Carry?

You can click the graphic below for the historical numbers, but it shows that as of June 2024 D-Market Elektronik Hizmetler ve Ticaret had ₺473.2m of debt, an increase on ₺199.8m, over one year. However, it does have ₺6.86b in cash offsetting this, leading to net cash of ₺6.39b.

How Healthy Is D-Market Elektronik Hizmetler ve Ticaret's Balance Sheet?

The latest balance sheet data shows that D-Market Elektronik Hizmetler ve Ticaret had liabilities of ₺15.9b due within a year, and liabilities of ₺980.9m falling due after that. Offsetting this, it had ₺6.86b in cash and ₺3.09b in receivables that were due within 12 months. So it has liabilities totalling ₺6.97b more than its cash and near-term receivables, combined.

Of course, D-Market Elektronik Hizmetler ve Ticaret has a market capitalization of ₺38.6b, 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, D-Market Elektronik Hizmetler ve Ticaret boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine D-Market Elektronik Hizmetler ve Ticaret'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.

Over 12 months, D-Market Elektronik Hizmetler ve Ticaret saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that's not too bad, we'd prefer see 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 generated positive free cash flow of ₺5.7b. 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. Until we see some positive EBIT, we're a bit cautious of the stock, not least because of the rather modest revenue growth. 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. For instance, we've identified 1 warning sign for D-Market Elektronik Hizmetler ve Ticaret that you should be aware of.

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.