Does C. V’s Promotora y Operadora de Infraestructura SAB (BMV: PINFRA) have a healthy balance sheet?
Howard Marks put it well when he said that, rather than worrying about stock price volatility, “The possibility of permanent loss is the risk I worry about … and every investor practice that I know is worried. ” When we think about how risky a business is, we always like to look at its use of debt because debt overload can lead to bankruptcy. We can see that Promotora y Operadora de Infraestructura, SAB de CV (BMV: PINFRA) uses debt in his business. But does this debt worry shareholders?
What risk does debt entail?
Debt is a tool to help businesses grow, but if a business is unable to repay its lenders, then it exists at their mercy. Ultimately, if the company can’t meet its legal debt repayment obligations, shareholders could walk away with nothing. While it’s not too common, we often see indebted companies continually diluting their shareholders because lenders are forcing them to raise capital at a ridiculous price. Of course, debt can be an important tool in businesses, especially capital intensive businesses. When we look at debt levels, we first consider both liquidity and debt levels.
Check out our latest review for Promotora y Operadora de Infraestructura SAB de C. V
What is the net debt of Promotora y Operadora de Infraestructura SAB de C. V?
The graph below, which you can click for more details, shows that Promotora y Operadora de Infraestructura SAB de C. V had a debt of Mexican $ 16.3 billion in June 2021; about the same as the year before. However, it has Mexican $ 27.9 billion in cash offsetting this, which leads to a net cash position of Mex $ 11.6 billion.
A look at the responsibilities of Promotora y Operadora de Infraestructura SAB de C. V
We can see from the most recent balance sheet that Promotora y Operadora de Infraestructura SAB de C. V had a liability of 5.70 billion Mex maturing within one year and a liability of 17.6 billion Mex. beyond. In return, he had Mex $ 27.9 billion in cash and Mex $ 1.61 billion in receivables due within 12 months. It can therefore boast of having more than $ 6.16 billion in liquid assets than total Liabilities.
This short-term liquidity is a sign that Promotora y Operadora de Infraestructura SAB de C. V could probably repay its debt easily, as its balance sheet is far from tight. In short, Promotora y Operadora de Infraestructura SAB de C. V has a net cash flow, so it is fair to say that it does not have a heavy debt load!
Fortunately, Promotora y Operadora de Infraestructura SAB de C. V has increased its EBIT by 9.2% over the past year, which makes this debt even more manageable. There is no doubt that we learn the most about debt from the balance sheet. But ultimately the future profitability of the business will decide whether C. V’s Promotora y Operadora de Infraestructura SAB can strengthen its balance sheet over time. So if you are focused on the future you can check this out free report showing analysts’ earnings forecasts.
Finally, a business can only repay its debts with hard cash, not with book profits. Promotora y Operadora de Infraestructura SAB de C. V may have net cash on the balance sheet, but it is always interesting to see to what extent the company converts its earnings before interest and taxes (EBIT) into free cash flow, as this will influence both his need and his ability to manage debt. In the last three years Promotora y Operadora de Infraestructura SAB de C. V has spent a lot of money. While investors no doubt expect this situation to reverse in due course, it clearly means that its use of debt is riskier.
While it is always a good idea to investigate a company’s debt, in this case Promotora y Operadora de Infraestructura SAB de C. V has Mex $ 11.6 billion in net cash and a decent balance sheet. . In addition, it has increased its EBIT by 9.2% over the past twelve months. So we have no problem with the use of debt by Promotora y Operadora de Infraestructura SAB de CV When analyzing debt levels, the balance sheet is the obvious starting point. However, not all investment risks lie on the balance sheet – far from it. For example, we discovered 1 warning sign for Promotora y Operadora de Infraestructura SAB de C. V which you should know before investing here.
If, after all of this, you’re more interested in a fast-growing company with a strong balance sheet, take a quick look at our list of cash net growth stocks.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.
If you decide to trade Promotora y Operadora de Infraestructura SAB de C. V, use the cheapest platform * which is ranked # 1 overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, currencies, bonds and funds in 135 markets, all from one integrated account.Promoted