The external fund manager backed by Berkshire Hathaway’s Charlie Munger, Li Lu, creates no bones about it when he declares ‘The hugegest 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 Companhia CELG de Participações S/A (BVMF:GPAR3) does utilize debt in its business. But is this debt a concern to shareholders?
When Is Debt A Problem?
Generally speaking, debt only becomes a real problem when a company can’t easily pay it off, either by raising capital or with its own cash flow. Part and parcel of capitalism is the process of ‘creative destruction’ where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders becautilize lfinishers force them to raise capital at a distressed price. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business utilizes is to view at its cash and debt toreceiveher.
What Is Companhia CELG de Participações S/A’s Debt?
As you can see below, Companhia CELG de Participações S/A had R$10.6m of debt at September 2025, down from R$13.0m a year prior. But on the other hand it also has R$267.0m in cash, leading to a R$256.4m net cash position.
How Healthy Is Companhia CELG de Participações S/A’s Balance Sheet?
According to the last reported balance sheet, Companhia CELG de Participações S/A had liabilities of R$12.0m due within 12 months, and liabilities of R$27.6m due beyond 12 months. Offsetting these obligations, it had cash of R$267.0m as well as receivables valued at R$41.1m due within 12 months. So it actually has R$268.4m more liquid assets than total liabilities.
This surplus suggests that Companhia CELG de Participações S/A is utilizing debt in a way that is appears to be both safe and conservative. Given it has easily adequate short term liquidity, we don’t believe it will have any issues with its lfinishers. Simply put, the fact that Companhia CELG de Participações S/A has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Companhia CELG de Participações S/A’s earnings that will influence how the balance sheet holds up in the future. So when considering debt, it’s definitely worth viewing at the earnings trfinish. Click here for an interactive snapshot.
Check out our latest analysis for Companhia CELG de Participações S/A
Over 12 months, Companhia CELG de Participações S/A reported revenue of R$35m, which is a gain of 9.2%, although it did not report any earnings before interest and tax. We usually like to see rapider growth from unprofitable companies, but each to their own.
So How Risky Is Companhia CELG de Participações S/A?
Although Companhia CELG de Participações S/A had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of R$30m. So although it is loss-building, it doesn’t seem to have too much near-term balance sheet risk, keeping in mind the net cash. We’ll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. There’s no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. To that finish, you should be aware of the 2 warning signs we’ve spotted with Companhia CELG de Participações S/A .
If you’re interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.
New: AI Stock Screener & Alerts
Our new AI Stock Screener scans the market every day to uncover opportunities.
• Dividfinish Powerhoutilizes (3%+ Yield)
• Undervalued Small Caps with Insider Buying
• High growth Tech and AI Companies
Or build your own from over 50 metrics.
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 utilizing an unbiased methodology and our articles are not intfinished to be financial advice. It does not constitute a recommfinishation to purchase or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focutilized 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.
Leave a Reply