Is Wooyang HC (KOSDAQ:101970) A Risky Investment?

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. Importantly, Wooyang HC Co., Ltd. (KOSDAQ:101970) does carry debt. But is this debt a concern to shareholders?

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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. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Wooyang HC's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Wooyang HC had ₩22.7b of debt in March 2025, down from ₩50.1b, one year before. But it also has ₩58.4b in cash to offset that, meaning it has ₩35.8b net cash.

A Look At Wooyang HC's Liabilities

We can see from the most recent balance sheet that Wooyang HC had liabilities of ₩51.3b falling due within a year, and liabilities of ₩26.1b due beyond that. Offsetting this, it had ₩58.4b in cash and ₩50.1b in receivables that were due within 12 months. So it can boast ₩31.1b more liquid assets than total liabilities.

This surplus suggests that Wooyang HC has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Wooyang HC boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Wooyang HC

On the other hand, Wooyang HC's EBIT dived 17%, over the last year. We think hat kind of performance, if repeated frequently, could well lead to difficulties for the stock. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Wooyang HC will need earnings to service that debt. 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Wooyang HC has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Happily for any shareholders, Wooyang HC actually produced more free cash flow than EBIT over the last three years. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

While it is always sensible to investigate a company's debt, in this case Wooyang HC has ₩35.8b in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of ₩64b, being 105% of its EBIT. So we are not troubled with Wooyang HC's debt use. 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. We've identified 2 warning signs with Wooyang HC (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.