Is Triunfo Participações e Investimentos (BVMF:TPIS3) Using Too Much Debt?

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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Triunfo Participações e Investimentos S.A. (BVMF:TPIS3) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

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. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is Triunfo Participações e Investimentos's Debt?

The image below, which you can click on for greater detail, shows that Triunfo Participações e Investimentos had debt of R$1.29b at the end of September 2025, a reduction from R$1.39b over a year. On the flip side, it has R$63.7m in cash leading to net debt of about R$1.23b.

How Strong Is Triunfo Participações e Investimentos' Balance Sheet?

We can see from the most recent balance sheet that Triunfo Participações e Investimentos had liabilities of R$1.19b falling due within a year, and liabilities of R$536.1m due beyond that. Offsetting this, it had R$63.7m in cash and R$93.2m in receivables that were due within 12 months. So its liabilities total R$1.57b more than the combination of its cash and short-term receivables.

The deficiency here weighs heavily on the R$193.5m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we definitely think shareholders need to watch this one closely. After all, Triunfo Participações e Investimentos would likely require a major re-capitalisation if it had to pay its creditors today.

View our latest analysis for Triunfo Participações e Investimentos

In order to size up a company's debt relative to its earnings, we calculate its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and its earnings before interest and tax (EBIT) divided by its interest expense (its interest cover). The advantage of this approach is that we take into account both the absolute quantum of debt (with net debt to EBITDA) and the actual interest expenses associated with that debt (with its interest cover ratio).

We'd say that Triunfo Participações e Investimentos's moderate net debt to EBITDA ratio ( being 2.4), indicates prudence when it comes to debt. And its strong interest cover of 14.1 times, makes us even more comfortable. One way Triunfo Participações e Investimentos could vanquish its debt would be if it stops borrowing more but continues to grow EBIT at around 12%, as it did over the last year. There's no doubt that we learn most about debt from the balance sheet. But it is Triunfo Participações e Investimentos's earnings that will influence how the balance sheet holds up in the future. 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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. So it's worth checking how much of that EBIT is backed by free cash flow. Over the last three years, Triunfo Participações e Investimentos actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Our View

Triunfo Participações e Investimentos's level of total liabilities was a real negative on this analysis, although the other factors we considered were considerably better. In particular, we are dazzled with its interest cover. It's also worth noting that Triunfo Participações e Investimentos is in the Infrastructure industry, which is often considered to be quite defensive. Looking at all this data makes us feel a little cautious about Triunfo Participações e Investimentos's debt levels. While debt does have its upside in higher potential returns, we think shareholders should definitely consider how debt levels might make the stock more 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. For example Triunfo Participações e Investimentos has 2 warning signs (and 1 which can't be ignored) we think 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.