Is Promotora y Operadora de Infraestructura S. A. B. de C. V (BMV:PINFRA) A Risky Investment?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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. Importantly, Promotora y Operadora de Infraestructura, S. A. B. de C. V. (BMV:PINFRA) does carry debt. But should shareholders be worried about its use of debt?

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

When Is Debt Dangerous?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Promotora y Operadora de Infraestructura S. A. B. de C. V's Debt?

You can click the graphic below for the historical numbers, but it shows that Promotora y Operadora de Infraestructura S. A. B. de C. V had Mex$11.4b of debt in September 2025, down from Mex$12.8b, one year before. However, its balance sheet shows it holds Mex$40.0b in cash, so it actually has Mex$28.6b net cash.

How Healthy Is Promotora y Operadora de Infraestructura S. A. B. de C. V's Balance Sheet?

The latest balance sheet data shows that Promotora y Operadora de Infraestructura S. A. B. de C. V had liabilities of Mex$5.86b due within a year, and liabilities of Mex$10.7b falling due after that. On the other hand, it had cash of Mex$40.0b and Mex$1.41b worth of receivables due within a year. So it can boast Mex$24.8b more liquid assets than total liabilities.

It's good to see that Promotora y Operadora de Infraestructura S. A. B. de C. V has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Simply put, the fact that Promotora y Operadora de Infraestructura S. A. B. de C. V has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for Promotora y Operadora de Infraestructura S. A. B. de C. V

Better yet, Promotora y Operadora de Infraestructura S. A. B. de C. V grew its EBIT by 114% last year, which is an impressive improvement. If maintained that growth will make the debt even more manageable in the years ahead. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Promotora y Operadora de Infraestructura 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, a company can only pay off debt with cold hard cash, not accounting profits. Promotora y Operadora de Infraestructura S. A. B. de C. V 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. During the last three years, Promotora y Operadora de Infraestructura 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.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Promotora y Operadora de Infraestructura S. A. B. de C. V has net cash of Mex$28.6b, as well as more liquid assets than liabilities. And we liked the look of last year's 114% year-on-year EBIT growth. So we don't think Promotora y Operadora de Infraestructura S. A. B. de C. V's use of debt is risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 1 warning sign for Promotora y Operadora de Infraestructura S. A. B. de C. V that you should be aware of.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.