Is Compañía Minera Autlán. de (BMV:AUTLANB) Weighed On By Its Debt Load?

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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Compañía Minera Autlán, S.A.B. de C.V. (BMV:AUTLANB) does have debt on its balance sheet. But is this debt a concern to shareholders?

When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for Compañía Minera Autlán. de

What Is Compañía Minera Autlán. de's Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2023 Compañía Minera Autlán. de had US$191.6m of debt, an increase on US$178.7m, over one year. However, it does have US$62.5m in cash offsetting this, leading to net debt of about US$129.1m.

How Strong Is Compañía Minera Autlán. de's Balance Sheet?

The latest balance sheet data shows that Compañía Minera Autlán. de had liabilities of US$221.9m due within a year, and liabilities of US$224.4m falling due after that. Offsetting these obligations, it had cash of US$62.5m as well as receivables valued at US$40.3m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$343.5m.

This deficit casts a shadow over the US$202.1m company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. At the end of the day, Compañía Minera Autlán. de would probably need a major re-capitalization if its creditors were to demand repayment. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Compañía Minera Autlán. de will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

In the last year Compañía Minera Autlán. de had a loss before interest and tax, and actually shrunk its revenue by 32%, to US$424m. To be frank that doesn't bode well.

Caveat Emptor

Not only did Compañía Minera Autlán. de's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Its EBIT loss was a whopping US$29m. Considering that alongside the liabilities mentioned above make us nervous about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. It's fair to say the loss of US$83m didn't encourage us either; we'd like to see a profit. And until that time we think this is a risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 3 warning signs for Compañía Minera Autlán. de (1 is significant!) that you should be aware of before investing here.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.