Is Hyulim ROBOTLtd (KOSDAQ:090710) Using Debt In A Risky Way?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 can see that Hyulim ROBOT Co.,Ltd. (KOSDAQ:090710) does use debt in its business. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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.

Check out our latest analysis for Hyulim ROBOTLtd

What Is Hyulim ROBOTLtd's Debt?

You can click the graphic below for the historical numbers, but it shows that Hyulim ROBOTLtd had ₩2.75b of debt in March 2024, down from ₩12.7b, one year before. However, its balance sheet shows it holds ₩22.7b in cash, so it actually has ₩20.0b net cash.

How Healthy Is Hyulim ROBOTLtd's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Hyulim ROBOTLtd had liabilities of ₩19.6b due within 12 months and liabilities of ₩1.15b due beyond that. On the other hand, it had cash of ₩22.7b and ₩6.69b worth of receivables due within a year. So it actually has ₩8.64b more liquid assets than total liabilities.

This short term liquidity is a sign that Hyulim ROBOTLtd could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Hyulim ROBOTLtd has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. 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 ₩86b, 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?

Although Hyulim ROBOTLtd had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of ₩6.2b. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. We think its revenue growth of 28% is a good sign. There's no doubt fast top line growth can cure all manner of ills, for a stock. 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. For instance, we've identified 3 warning signs for Hyulim ROBOTLtd (1 is concerning) you should be aware of.

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.