Good question. Leverage has always been very high, part of management's philosophy. I had assumed at the start of the pandemic that they would go bust in 2020 given the excessive debt but they were able to roll things okay and banks worked with them.
If they could get through 2020 with highly limited cash flow coming in without diluting shareholders let alone wiping out the equity, they shouldn't have any issues during a bull market/Mexican economic expansion.
That said, if and when the economy turns down again in Mexico, it's worth watching the balance sheet.
Very interesting, thanks. But the debt level seems kind of high at 3-4x EBITDA. How do you get comfortable with that?
Good question. Leverage has always been very high, part of management's philosophy. I had assumed at the start of the pandemic that they would go bust in 2020 given the excessive debt but they were able to roll things okay and banks worked with them.
If they could get through 2020 with highly limited cash flow coming in without diluting shareholders let alone wiping out the equity, they shouldn't have any issues during a bull market/Mexican economic expansion.
That said, if and when the economy turns down again in Mexico, it's worth watching the balance sheet.
Ian, thanks for posting this great content