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These 4 Measures Indicate That Computer Direct Group (TLV:CMDR) Is Using Debt Safely

Simply Wall St · 2d ago

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.' 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, Computer Direct Group Ltd. (TLV:CMDR) does carry debt. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

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

The image below, which you can click on for greater detail, shows that Computer Direct Group had debt of ₪132.6m at the end of September 2025, a reduction from ₪196.1m over a year. But it also has ₪488.9m in cash to offset that, meaning it has ₪356.2m net cash.

debt-equity-history-analysis
TASE:CMDR Debt to Equity History December 24th 2025

How Strong Is Computer Direct Group's Balance Sheet?

We can see from the most recent balance sheet that Computer Direct Group had liabilities of ₪1.29b falling due within a year, and liabilities of ₪211.2m due beyond that. On the other hand, it had cash of ₪488.9m and ₪957.0m worth of receivables due within a year. So it has liabilities totalling ₪51.0m more than its cash and near-term receivables, combined.

Of course, Computer Direct Group has a market capitalization of ₪1.81b, 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. While it does have liabilities worth noting, Computer Direct Group also has more cash than debt, so we're pretty confident it can manage its debt safely.

Check out our latest analysis for Computer Direct Group

Also positive, Computer Direct Group grew its EBIT by 20% in the last year, and that should make it easier to pay down debt, going forward. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Computer Direct Group 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Computer Direct Group may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last three years, Computer Direct Group actually produced more free cash flow than EBIT. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

Summing Up

We could understand if investors are concerned about Computer Direct Group's liabilities, but we can be reassured by the fact it has has net cash of ₪356.2m. And it impressed us with free cash flow of ₪405m, being 123% of its EBIT. So is Computer Direct Group's debt a risk? It doesn't seem so to us. 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. For instance, we've identified 1 warning sign for Computer Direct Group that you should be aware of.

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.