Mivne Real Estate (K.D) (TLV:MVNE) Takes On Some Risk With Its Use Of Debt

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.' 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 note that Mivne Real Estate (K.D) Ltd (TLV:MVNE) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Mivne Real Estate (K.D)'s Debt?

The chart below, which you can click on for greater detail, shows that Mivne Real Estate (K.D) had ₪8.73b in debt in September 2025; about the same as the year before. However, it also had ₪577.5m in cash, and so its net debt is ₪8.15b.

A Look At Mivne Real Estate (K.D)'s Liabilities

The latest balance sheet data shows that Mivne Real Estate (K.D) had liabilities of ₪1.85b due within a year, and liabilities of ₪9.20b falling due after that. Offsetting these obligations, it had cash of ₪577.5m as well as receivables valued at ₪487.6m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₪9.98b.

This deficit is considerable relative to its market capitalization of ₪11.3b, so it does suggest shareholders should keep an eye on Mivne Real Estate (K.D)'s use of debt. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution.

Check out our latest analysis for Mivne Real Estate (K.D)

We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.

Mivne Real Estate (K.D) has a rather high debt to EBITDA ratio of 10.5 which suggests a meaningful debt load. However, its interest coverage of 4.8 is reasonably strong, which is a good sign. Unfortunately, Mivne Real Estate (K.D) saw its EBIT slide 9.1% in the last twelve months. If that earnings trend continues then its debt load will grow heavy like the heart of a polar bear watching its sole cub. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Mivne Real Estate (K.D) 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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. So we always check how much of that EBIT is translated into free cash flow. Over the most recent three years, Mivne Real Estate (K.D) recorded free cash flow worth 63% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Our View

Mulling over Mivne Real Estate (K.D)'s attempt at managing its debt, based on its EBITDA,, we're certainly not enthusiastic. But at least it's pretty decent at converting EBIT to free cash flow; that's encouraging. Looking at the balance sheet and taking into account all these factors, we do believe that debt is making Mivne Real Estate (K.D) stock a bit risky. Some people like that sort of risk, but we're mindful of the potential pitfalls, so we'd probably prefer it carry less debt. 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. We've identified 3 warning signs with Mivne Real Estate (K.D) (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.