We Think O.Y. Nofar Energy (TLV:NOFR) Has A Fair Chunk Of Debt

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. Importantly, O.Y. Nofar Energy Ltd (TLV:NOFR) does carry debt. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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 O.Y. Nofar Energy Carry?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 O.Y. Nofar Energy had ₪4.53b of debt, an increase on ₪3.14b, over one year. However, it does have ₪821.4m in cash offsetting this, leading to net debt of about ₪3.71b.

How Strong Is O.Y. Nofar Energy's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that O.Y. Nofar Energy had liabilities of ₪943.2m due within 12 months and liabilities of ₪4.51b due beyond that. On the other hand, it had cash of ₪821.4m and ₪328.3m worth of receivables due within a year. So its liabilities total ₪4.30b more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of ₪5.28b, so it does suggest shareholders should keep an eye on O.Y. Nofar Energy's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since O.Y. Nofar Energy will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for O.Y. Nofar Energy

In the last year O.Y. Nofar Energy wasn't profitable at an EBIT level, but managed to grow its revenue by 6.6%, to ₪335m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Importantly, O.Y. Nofar Energy had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at ₪22m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled ₪1.3b in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 2 warning signs for O.Y. Nofar Energy you should be aware of, and 1 of them is a bit concerning.

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.