Is Plano & Plano Desenvolvimento Imobiliário (BVMF:PLPL3) A Risky Investment?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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. We note that Plano & Plano Desenvolvimento Imobiliário S.A. (BVMF:PLPL3) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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. If things get really bad, the lenders can take control of the business. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Plano & Plano Desenvolvimento Imobiliário's Net Debt?

As you can see below, Plano & Plano Desenvolvimento Imobiliário had R$330.0m of debt at September 2025, down from R$596.6m a year prior. But on the other hand it also has R$975.8m in cash, leading to a R$645.8m net cash position.

How Healthy Is Plano & Plano Desenvolvimento Imobiliário's Balance Sheet?

The latest balance sheet data shows that Plano & Plano Desenvolvimento Imobiliário had liabilities of R$893.7m due within a year, and liabilities of R$1.85b falling due after that. Offsetting these obligations, it had cash of R$975.8m as well as receivables valued at R$981.4m due within 12 months. So its liabilities total R$788.4m more than the combination of its cash and short-term receivables.

This deficit isn't so bad because Plano & Plano Desenvolvimento Imobiliário is worth R$2.85b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. While it does have liabilities worth noting, Plano & Plano Desenvolvimento Imobiliário also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Plano & Plano Desenvolvimento Imobiliário

Fortunately, Plano & Plano Desenvolvimento Imobiliário grew its EBIT by 7.7% in the last year, making that debt load look even more manageable. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Plano & Plano Desenvolvimento Imobiliário's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. Plano & Plano Desenvolvimento Imobiliário 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. In the last three years, Plano & Plano Desenvolvimento Imobiliário's free cash flow amounted to 35% of its EBIT, less than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While Plano & Plano Desenvolvimento Imobiliário does have more liabilities than liquid assets, it also has net cash of R$645.8m. On top of that, it increased its EBIT by 7.7% in the last twelve months. So we are not troubled with Plano & Plano Desenvolvimento Imobiliário's debt use. 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 2 warning signs for Plano & Plano Desenvolvimento Imobiliário you should be aware of, and 1 of them is significant.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.