Does Tecnoglass (NYSE:TGLS) Have A Healthy Balance Sheet?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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 can see that Tecnoglass Inc. (NYSE:TGLS) does use debt in its business. But is this debt a concern to shareholders?

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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. 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 think about a company's use of debt, we first look at cash and debt together.

What Is Tecnoglass's Debt?

As you can see below, Tecnoglass had US$123.2m of debt, at September 2025, which is about the same as the year before. You can click the chart for greater detail. However, its balance sheet shows it holds US$129.1m in cash, so it actually has US$5.96m net cash.

How Healthy Is Tecnoglass' Balance Sheet?

We can see from the most recent balance sheet that Tecnoglass had liabilities of US$332.6m falling due within a year, and liabilities of US$131.5m due beyond that. Offsetting these obligations, it had cash of US$129.1m as well as receivables valued at US$277.1m due within 12 months. So it has liabilities totalling US$57.9m more than its cash and near-term receivables, combined.

Given Tecnoglass has a market capitalization of US$2.32b, 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. While it does have liabilities worth noting, Tecnoglass also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Tecnoglass

And we also note warmly that Tecnoglass grew its EBIT by 16% last year, making its debt load easier to handle. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Tecnoglass can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Tecnoglass 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, Tecnoglass recorded free cash flow of 26% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that Tecnoglass has US$5.96m in net cash. And we liked the look of last year's 16% year-on-year EBIT growth. So we don't have any problem with Tecnoglass's use of debt. Over time, share prices tend to follow earnings per share, so if you're interested in Tecnoglass, you may well want to click here to check an interactive graph of its earnings per share history.

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.

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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.