Does Compañía de Minas BuenaventuraA (NYSE:BVN) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Compañía de Minas Buenaventura S.A.A. (NYSE:BVN) 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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

See our latest analysis for Compañía de Minas BuenaventuraA

How Much Debt Does Compañía de Minas BuenaventuraA Carry?

The chart below, which you can click on for greater detail, shows that Compañía de Minas BuenaventuraA had US$622.4m in debt in September 2023; about the same as the year before. On the flip side, it has US$221.8m in cash leading to net debt of about US$400.6m.

How Strong Is Compañía de Minas BuenaventuraA's Balance Sheet?

We can see from the most recent balance sheet that Compañía de Minas BuenaventuraA had liabilities of US$373.9m falling due within a year, and liabilities of US$921.4m due beyond that. On the other hand, it had cash of US$221.8m and US$197.0m worth of receivables due within a year. So its liabilities total US$876.5m more than the combination of its cash and short-term receivables.

This deficit isn't so bad because Compañía de Minas BuenaventuraA is worth US$3.94b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Compañía de Minas BuenaventuraA's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

In the last year Compañía de Minas BuenaventuraA's revenue was pretty flat, and it made a negative EBIT. While that's not too bad, we'd prefer see growth.

Caveat Emptor

Importantly, Compañía de Minas BuenaventuraA had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost US$40m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled US$18m in negative free cash flow over the last twelve months. So to be blunt we think it is risky. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that Compañía de Minas BuenaventuraA is showing 1 warning sign in our investment analysis , you should know about...

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.