Is Proteak Uno. de (BMV:TEAKCPO) Using Debt In A Risky Way?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the 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 Proteak Uno, S.A.B. de C.V. (BMV:TEAKCPO) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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. If things get really bad, the lenders can take control of the business. 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. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for Proteak Uno. de

What Is Proteak Uno. de's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2024 Proteak Uno. de had Mex$2.07b of debt, an increase on Mex$1.86b, over one year. And it doesn't have much cash, so its net debt is about the same.

How Strong Is Proteak Uno. de's Balance Sheet?

We can see from the most recent balance sheet that Proteak Uno. de had liabilities of Mex$2.61b falling due within a year, and liabilities of Mex$640.1m due beyond that. Offsetting these obligations, it had cash of Mex$29.0m as well as receivables valued at Mex$287.0m due within 12 months. So its liabilities total Mex$2.94b more than the combination of its cash and short-term receivables.

The deficiency here weighs heavily on the Mex$114.5m 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. At the end of the day, Proteak Uno. de would probably need a major re-capitalization if its creditors were to demand repayment. When analysing debt levels, the balance sheet is the obvious place to start. But it is Proteak Uno. de's earnings that will influence how the balance sheet holds up in the future. 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 Proteak Uno. de had a loss before interest and tax, and actually shrunk its revenue by 16%, to Mex$1.2b. That's not what we would hope to see.

Caveat Emptor

While Proteak Uno. de's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Its EBIT loss was a whopping Mex$208m. Reflecting on this and the significant total liabilities, it's hard to know what to say about the stock because of our intense dis-affinity for it. Like every long-shot we're sure it has a glossy presentation outlining its blue-sky potential. But the reality is that it is low on liquid assets relative to liabilities, and it lost Mex$739m in the last year. So we think buying this stock is risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 3 warning signs for Proteak Uno. de that 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.

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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.