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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that GCC, S.A.B. de C.V. (BMV:GCC) does have debt on its balance sheet. But is this debt a concern to shareholders?
Why Does Debt Bring Risk?
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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.
What Is GCC. de's Net Debt?
As you can see below, at the end of March 2025, GCC. de had US$597.4m of debt, up from US$497.1m a year ago. Click the image for more detail. But it also has US$873.4m in cash to offset that, meaning it has US$276.1m net cash.
A Look At GCC. de's Liabilities
The latest balance sheet data shows that GCC. de had liabilities of US$295.2m due within a year, and liabilities of US$862.3m falling due after that. Offsetting these obligations, it had cash of US$873.4m as well as receivables valued at US$150.9m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$133.2m.
Of course, GCC. de has a market capitalization of US$2.91b, so these liabilities are probably manageable. 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!
Check out our latest analysis for GCC. de
On the other hand, GCC. de saw its EBIT drop by 4.7% in the last twelve months. If earnings continue to decline at that rate the company may have increasing difficulty managing its debt load. There's no doubt that we learn most about debt from the balance sheet. 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.
Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. GCC. de 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, GCC. de'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
We could understand if investors are concerned about GCC. de's liabilities, but we can be reassured by the fact it has has net cash of US$276.1m. So we are not troubled with GCC. de's debt use. 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. Case in point: We've spotted 1 warning sign for GCC. de you should be aware of.
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.
Valuation is complex, but we're here to simplify it.
Discover if GCC. de might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.