Is Hyulim ROBOTLtd (KOSDAQ:090710) Using Too Much Debt?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Hyulim ROBOT Co.,Ltd. (KOSDAQ:090710) does use debt in its business. But is this debt a concern to shareholders?

When Is Debt A Problem?

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. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

Check out our latest analysis for Hyulim ROBOTLtd

What Is Hyulim ROBOTLtd's Net Debt?

The image below, which you can click on for greater detail, shows that at September 2024 Hyulim ROBOTLtd had debt of ₩64.0b, up from ₩12.8b in one year. But on the other hand it also has ₩118.4b in cash, leading to a ₩54.3b net cash position.

A Look At Hyulim ROBOTLtd's Liabilities

The latest balance sheet data shows that Hyulim ROBOTLtd had liabilities of ₩52.0b due within a year, and liabilities of ₩33.3b falling due after that. Offsetting this, it had ₩118.4b in cash and ₩12.8b in receivables that were due within 12 months. So it can boast ₩45.8b more liquid assets than total liabilities.

It's good to see that Hyulim ROBOTLtd has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, Hyulim ROBOTLtd boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is Hyulim ROBOTLtd's earnings that will influence how the balance sheet holds up in the future. 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 ₩96b, which is a gain of 36%, 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 ₩2.5b. 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 36% is a good sign. We'd see further strong growth as an optimistic indication. 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. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Hyulim ROBOTLtd 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.