Is Samkee Energy Solutions (KOSDAQ:419050) A Risky Investment?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Samkee Energy Solutions Co., Ltd (KOSDAQ:419050) does use debt in its business. But is this debt a concern to shareholders?

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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. 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 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.

What Is Samkee Energy Solutions's Net Debt?

The image below, which you can click on for greater detail, shows that at March 2025 Samkee Energy Solutions had debt of ₩145.2b, up from ₩121.2b in one year. However, it does have ₩23.4b in cash offsetting this, leading to net debt of about ₩121.7b.

A Look At Samkee Energy Solutions' Liabilities

The latest balance sheet data shows that Samkee Energy Solutions had liabilities of ₩90.2b due within a year, and liabilities of ₩94.5b falling due after that. Offsetting this, it had ₩23.4b in cash and ₩38.1b in receivables that were due within 12 months. So its liabilities total ₩123.2b more than the combination of its cash and short-term receivables.

This is a mountain of leverage relative to its market capitalization of ₩132.7b. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Samkee Energy Solutions'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.

View our latest analysis for Samkee Energy Solutions

In the last year Samkee Energy Solutions wasn't profitable at an EBIT level, but managed to grow its revenue by 30%, to ₩109b. Shareholders probably have their fingers crossed that it can grow its way to profits.

Caveat Emptor

Even though Samkee Energy Solutions managed to grow its top line quite deftly, the cold hard truth is that it is losing money on the EBIT line. To be specific the EBIT loss came in at ₩2.6b. 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 ₩13b in negative free cash flow over the last twelve months. So in short it's a really risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Samkee Energy Solutions (of which 1 is a bit concerning!) you should know about.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.