Does Grupo Aeroportuario del Sureste S. A. B. de C. V (BMV:ASURB) Have A Healthy Balance Sheet?

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.' 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 Grupo Aeroportuario del Sureste, S. A. B. de C. V. (BMV:ASURB) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

When Is Debt Dangerous?

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. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for Grupo Aeroportuario del Sureste S. A. B. de C. V

How Much Debt Does Grupo Aeroportuario del Sureste S. A. B. de C. V Carry?

You can click the graphic below for the historical numbers, but it shows that as of December 2022 Grupo Aeroportuario del Sureste S. A. B. de C. V had Mex$15.2b of debt, an increase on Mex$13.8b, over one year. However, it does have Mex$13.2b in cash offsetting this, leading to net debt of about Mex$2.03b.

How Healthy Is Grupo Aeroportuario del Sureste S. A. B. de C. V's Balance Sheet?

We can see from the most recent balance sheet that Grupo Aeroportuario del Sureste S. A. B. de C. V had liabilities of Mex$5.56b falling due within a year, and liabilities of Mex$16.3b due beyond that. Offsetting this, it had Mex$13.2b in cash and Mex$4.73b in receivables that were due within 12 months. So its liabilities total Mex$4.00b more than the combination of its cash and short-term receivables.

Since publicly traded Grupo Aeroportuario del Sureste S. A. B. de C. V shares are worth a total of Mex$163.2b, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. But either way, Grupo Aeroportuario del Sureste S. A. B. de C. V has virtually no net debt, so it's fair to say it does not have a heavy debt load!

In order to size up a company's debt relative to its earnings, we calculate its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and its earnings before interest and tax (EBIT) divided by its interest expense (its interest cover). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.

Grupo Aeroportuario del Sureste S. A. B. de C. V has a low net debt to EBITDA ratio of only 0.12. And its EBIT covers its interest expense a whopping 36.3 times over. So we're pretty relaxed about its super-conservative use of debt. In addition to that, we're happy to report that Grupo Aeroportuario del Sureste S. A. B. de C. V has boosted its EBIT by 70%, thus reducing the spectre of future debt repayments. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Grupo Aeroportuario del Sureste S. A. B. de C. V's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. So it's worth checking how much of that EBIT is backed by free cash flow. During the last three years, Grupo Aeroportuario del Sureste S. A. B. de C. V produced sturdy free cash flow equating to 64% of its EBIT, about what we'd expect. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Our View

Happily, Grupo Aeroportuario del Sureste S. A. B. de C. V's impressive interest cover implies it has the upper hand on its debt. And that's just the beginning of the good news since its EBIT growth rate is also very heartening. It's also worth noting that Grupo Aeroportuario del Sureste S. A. B. de C. V is in the Infrastructure industry, which is often considered to be quite defensive. We think Grupo Aeroportuario del Sureste S. A. B. de C. V is no more beholden to its lenders, than the birds are to birdwatchers. For investing nerds like us its balance sheet is almost charming. Another factor that would give us confidence in Grupo Aeroportuario del Sureste S. A. B. de C. V would be if insiders have been buying shares: if you're conscious of that signal too, you can find out instantly by clicking this link.

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.