CVC Brasil Operadora e Agência de Viagens (BVMF:CVCB3) Takes On Some Risk With Its Use Of Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. As with many other companies CVC Brasil Operadora e Agência de Viagens S.A. (BVMF:CVCB3) makes use of debt. But is this debt a concern to shareholders?

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 is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is CVC Brasil Operadora e Agência de Viagens's Debt?

You can click the graphic below for the historical numbers, but it shows that CVC Brasil Operadora e Agência de Viagens had R$381.7m of debt in September 2025, down from R$723.6m, one year before. On the flip side, it has R$241.7m in cash leading to net debt of about R$140.0m.

How Strong Is CVC Brasil Operadora e Agência de Viagens' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that CVC Brasil Operadora e Agência de Viagens had liabilities of R$2.49b due within 12 months and liabilities of R$577.0m due beyond that. On the other hand, it had cash of R$241.7m and R$1.15b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by R$1.68b.

The deficiency here weighs heavily on the R$901.7m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we definitely think shareholders need to watch this one closely. After all, CVC Brasil Operadora e Agência de Viagens would likely require a major re-capitalisation if it had to pay its creditors today.

See our latest analysis for CVC Brasil Operadora e Agência de Viagens

We measure a company's debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). The advantage of this approach is that we take into account both the absolute quantum of debt (with net debt to EBITDA) and the actual interest expenses associated with that debt (with its interest cover ratio).

Given net debt is only 0.59 times EBITDA, it is initially surprising to see that CVC Brasil Operadora e Agência de Viagens's EBIT has low interest coverage of 0.80 times. So one way or the other, it's clear the debt levels are not trivial. Notably, CVC Brasil Operadora e Agência de Viagens's EBIT launched higher than Elon Musk, gaining a whopping 163% on last year. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine CVC Brasil Operadora e Agência de Viagens'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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. So it's worth checking how much of that EBIT is backed by free cash flow. Happily for any shareholders, CVC Brasil Operadora e Agência de Viagens actually produced more free cash flow than EBIT over the last two years. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

Our View

We feel some trepidation about CVC Brasil Operadora e Agência de Viagens's difficulty level of total liabilities, but we've got positives to focus on, too. For example, its conversion of EBIT to free cash flow and EBIT growth rate give us some confidence in its ability to manage its debt. We think that CVC Brasil Operadora e Agência de Viagens's debt does make it a bit risky, after considering the aforementioned data points together. Not all risk is bad, as it can boost share price returns if it pays off, but this debt risk is worth keeping in mind. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 1 warning sign for CVC Brasil Operadora e Agência de Viagens that you should be aware of before investing here.

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.