Is GCC. de (BMV:GCC) A Risky Investment?

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.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that GCC, S.A.B. de C.V. (BMV:GCC) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does GCC. de Carry?

As you can see below, at the end of June 2025, GCC. de had US$596.3m of debt, up from US$497.1m a year ago. Click the image for more detail. But on the other hand it also has US$826.9m in cash, leading to a US$230.5m net cash position.

How Strong Is GCC. de's Balance Sheet?

According to the last reported balance sheet, GCC. de had liabilities of US$304.3m due within 12 months, and liabilities of US$884.7m due beyond 12 months. On the other hand, it had cash of US$826.9m and US$205.8m worth of receivables due within a year. So it has liabilities totalling US$156.3m more than its cash and near-term receivables, combined.

Given GCC. de has a market capitalization of US$3.11b, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, GCC. de boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for GCC. de

On the other hand, GCC. de saw its EBIT drop by 7.1% in the last twelve months. If earnings continue to decline at that rate the company may have increasing difficulty managing its debt load. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if GCC. de can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While GCC. de has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Looking at the most recent three years, GCC. de recorded free cash flow of 28% of its EBIT, which is weaker than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that GCC. de has US$230.5m in net cash. So we are not troubled with GCC. de's debt use. Over time, share prices tend to follow earnings per share, so if you're interested in GCC. de, you may well want to click here to check an interactive graph of its earnings per share history.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.