Does Hyulim ROBOTLtd (KOSDAQ:090710) Have A Healthy Balance Sheet?

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. As with many other companies Hyulim ROBOT Co.,Ltd. (KOSDAQ:090710) makes use of debt. But is this debt a concern to shareholders?

When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for Hyulim ROBOTLtd

How Much Debt Does Hyulim ROBOTLtd Carry?

The image below, which you can click on for greater detail, shows that Hyulim ROBOTLtd had debt of ₩8.25b at the end of June 2024, a reduction from ₩12.9b over a year. However, its balance sheet shows it holds ₩23.1b in cash, so it actually has ₩14.9b net cash.

How Healthy Is Hyulim ROBOTLtd's Balance Sheet?

The latest balance sheet data shows that Hyulim ROBOTLtd had liabilities of ₩27.3b due within a year, and liabilities of ₩3.39b falling due after that. Offsetting these obligations, it had cash of ₩23.1b as well as receivables valued at ₩16.6b due within 12 months. So it can boast ₩9.03b more liquid assets than total liabilities.

This surplus suggests that Hyulim ROBOTLtd has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Hyulim ROBOTLtd boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Hyulim ROBOTLtd will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Over 12 months, Hyulim ROBOTLtd reported revenue of ₩90b, which is a gain of 28%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

So How Risky Is Hyulim ROBOTLtd?

While Hyulim ROBOTLtd lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow ₩1.7b. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. We think its revenue growth of 28% is a good sign. We'd see further strong growth as an optimistic indication. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example Hyulim ROBOTLtd has 4 warning signs (and 2 which don't sit too well with us) we think you should know about.

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.