Is GnCenergy (KOSDAQ:119850) Using Too Much Debt?

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 note that GnCenergy Co., Ltd (KOSDAQ:119850) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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 frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does GnCenergy Carry?

As you can see below, GnCenergy had ₩21.0b of debt at September 2025, down from ₩36.9b a year prior. But it also has ₩91.0b in cash to offset that, meaning it has ₩70.0b net cash.

A Look At GnCenergy's Liabilities

According to the last reported balance sheet, GnCenergy had liabilities of ₩82.9b due within 12 months, and liabilities of ₩15.3b due beyond 12 months. Offsetting these obligations, it had cash of ₩91.0b as well as receivables valued at ₩27.4b due within 12 months. So it actually has ₩20.2b more liquid assets than total liabilities.

This short term liquidity is a sign that GnCenergy could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, GnCenergy boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for GnCenergy

Better yet, GnCenergy grew its EBIT by 110% last year, which is an impressive improvement. If maintained that growth will make the debt even more manageable in the years ahead. When analysing debt levels, the balance sheet is the obvious place to start. But it is GnCenergy's earnings that will influence how the balance sheet holds up in the future. 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.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While GnCenergy 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. Over the last three years, GnCenergy recorded free cash flow worth a fulsome 97% of its EBIT, which is stronger than we'd usually expect. That positions it well to pay down debt if desirable to do so.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that GnCenergy has net cash of ₩70.0b, as well as more liquid assets than liabilities. The cherry on top was that in converted 97% of that EBIT to free cash flow, bringing in ₩49b. So we don't think GnCenergy's use of debt is risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for GnCenergy 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.