Tecnoglass (NYSE:TGLS) Seems To Use Debt Quite Sensibly

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.' 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. As with many other companies Tecnoglass Inc. (NYSE:TGLS) makes use of 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 A Problem?

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. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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.

What Is Tecnoglass's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Tecnoglass had US$118.3m of debt in March 2025, down from US$158.3m, one year before. But on the other hand it also has US$163.4m in cash, leading to a US$45.2m net cash position.

How Strong Is Tecnoglass' Balance Sheet?

According to the last reported balance sheet, Tecnoglass had liabilities of US$329.1m due within 12 months, and liabilities of US$124.1m due beyond 12 months. On the other hand, it had cash of US$163.4m and US$253.4m worth of receivables due within a year. So it has liabilities totalling US$36.3m more than its cash and near-term receivables, combined.

This state of affairs indicates that Tecnoglass' balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the US$3.68b company is short on cash, but still worth keeping an eye on the balance sheet. 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.

Check out our latest analysis for Tecnoglass

Fortunately, Tecnoglass grew its EBIT by 3.8% in the last year, making that debt load look even more manageable. 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Tecnoglass 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. Looking at the most recent three years, Tecnoglass recorded free cash flow of 29% 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$45.2m in net cash. On top of that, it increased its EBIT by 3.8% in the last twelve months. So we are not troubled with Tecnoglass's debt use. Of course, we wouldn't say no to the extra confidence that we'd gain if we knew that Tecnoglass insiders have been buying shares: if you're on the same wavelength, you can find out if insiders are buying by clicking this link.

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.