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 Zillow Group, Inc. (NASDAQ:ZG) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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.

What Is Zillow Group's Net Debt?

As you can see below, Zillow Group had US$1.70b of debt, at June 2024, which is about the same as the year before. You can click the chart for greater detail. However, it does have US$2.63b in cash offsetting this, leading to net cash of US$928.0m.

How Strong Is Zillow Group's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Zillow Group had liabilities of US$1.48b due within 12 months and liabilities of US$649.0m due beyond that. Offsetting this, it had US$2.63b in cash and US$115.0m in receivables that were due within 12 months. So it can boast US$620.0m more liquid assets than total liabilities.

This short term liquidity is a sign that Zillow Group could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Zillow Group 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 Zillow Group'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.

In the last year Zillow Group wasn't profitable at an EBIT level, but managed to grow its revenue by 9.4%, to US$2.1b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is Zillow Group?

While Zillow Group lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$125m. 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. With mediocre revenue growth in the last year, we're don't find the investment opportunity particularly compelling. For riskier companies like Zillow Group I always like to keep an eye on whether insiders are buying or selling. So click here if you want to find out for yourself.

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.