Averbuch Formica Center (TLV:AVER) Is Carrying A Fair Bit Of Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Averbuch Formica Center Ltd. (TLV:AVER) does carry debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Averbuch Formica Center Carry?

As you can see below, Averbuch Formica Center had ₪9.89m of debt at June 2025, down from ₪11.4m a year prior. Net debt is about the same, since the it doesn't have much cash.

How Healthy Is Averbuch Formica Center's Balance Sheet?

According to the last reported balance sheet, Averbuch Formica Center had liabilities of ₪8.74m due within 12 months, and liabilities of ₪9.31m due beyond 12 months. Offsetting this, it had ₪144.0k in cash and ₪8.21m in receivables that were due within 12 months. So its liabilities total ₪9.69m more than the combination of its cash and short-term receivables.

Of course, Averbuch Formica Center has a market capitalization of ₪94.5m, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Averbuch Formica Center will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Check out our latest analysis for Averbuch Formica Center

In the last year Averbuch Formica Center wasn't profitable at an EBIT level, but managed to grow its revenue by 2.4%, to ₪15m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Importantly, Averbuch Formica Center had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost ₪2.0m at the EBIT level. 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. So we think its balance sheet is a little strained, though not beyond repair. We would feel better if it turned its trailing twelve month loss of ₪2.8m into a profit. So we do think this stock is quite risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 4 warning signs for Averbuch Formica Center you should be aware of, and 2 of them are potentially serious.

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.