Is Murano Global Investments (NASDAQ:MRNO) Using Debt In A Risky Way?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 can see that Murano Global Investments Plc (NASDAQ:MRNO) does use debt in its business. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Murano Global Investments's Debt?

As you can see below, at the end of March 2025, Murano Global Investments had Mex$11.3b of debt, up from Mex$7.33b a year ago. Click the image for more detail. However, it also had Mex$469.0m in cash, and so its net debt is Mex$10.8b.

How Healthy Is Murano Global Investments' Balance Sheet?

According to the last reported balance sheet, Murano Global Investments had liabilities of Mex$4.10b due within 12 months, and liabilities of Mex$12.3b due beyond 12 months. Offsetting this, it had Mex$469.0m in cash and Mex$513.7m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by Mex$15.4b.

This deficit casts a shadow over the Mex$8.04b company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. At the end of the day, Murano Global Investments would probably need a major re-capitalization if its creditors were to demand repayment. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Murano Global Investments will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Check out our latest analysis for Murano Global Investments

In the last year Murano Global Investments wasn't profitable at an EBIT level, but managed to grow its revenue by 169%, to Mex$944m. So there's no doubt that shareholders are cheering for growth

Caveat Emptor

While we can certainly appreciate Murano Global Investments's revenue growth, its earnings before interest and tax (EBIT) loss is not ideal. Indeed, it lost Mex$517m at the EBIT level. Considering that alongside the liabilities mentioned above make us nervous about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it had negative free cash flow of Mex$1.1b over the last twelve months. So suffice it to say we consider the stock to be risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that Murano Global Investments is showing 3 warning signs in our investment analysis , and 2 of those are a bit concerning...

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.