Does T-Robotics.Co.Ltd (KOSDAQ:117730) 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.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that T-Robotics.Co.,Ltd. (KOSDAQ:117730) does use debt in its business. But the real question is whether this debt is making the company risky.

Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

View our latest analysis for T-Robotics.Co.Ltd

How Much Debt Does T-Robotics.Co.Ltd Carry?

You can click the graphic below for the historical numbers, but it shows that as of September 2023 T-Robotics.Co.Ltd had ₩35.1b of debt, an increase on ₩28.8b, over one year. However, it does have ₩54.4b in cash offsetting this, leading to net cash of ₩19.4b.

How Healthy Is T-Robotics.Co.Ltd's Balance Sheet?

We can see from the most recent balance sheet that T-Robotics.Co.Ltd had liabilities of ₩123.4b falling due within a year, and liabilities of ₩8.49b due beyond that. Offsetting this, it had ₩54.4b in cash and ₩8.38b in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩69.1b.

Of course, T-Robotics.Co.Ltd has a market capitalization of ₩385.3b, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, T-Robotics.Co.Ltd 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 future earnings, more than anything, that will determine T-Robotics.Co.Ltd's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Over 12 months, T-Robotics.Co.Ltd made a loss at the EBIT level, and saw its revenue drop to ₩39b, which is a fall of 31%. That makes us nervous, to say the least.

So How Risky Is T-Robotics.Co.Ltd?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that T-Robotics.Co.Ltd had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of ₩8.3b and booked a ₩46b accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of ₩19.4b. That means it could keep spending at its current rate for more than two years. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 3 warning signs with T-Robotics.Co.Ltd (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.