We Think Ecopro BM (KOSDAQ:247540) Has A Fair Chunk Of Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. As with many other companies Ecopro BM. Co., Ltd. (KOSDAQ:247540) makes use of debt. But the real question is whether this debt is making the company risky.

Our free stock report includes 1 warning sign investors should be aware of before investing in Ecopro BM. Read for free now.

When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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. 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.

What Is Ecopro BM's Net Debt?

As you can see below, at the end of December 2024, Ecopro BM had ₩1.94t of debt, up from ₩1.82t a year ago. Click the image for more detail. However, it also had ₩514.3b in cash, and so its net debt is ₩1.42t.

How Healthy Is Ecopro BM's Balance Sheet?

According to the last reported balance sheet, Ecopro BM had liabilities of ₩1.30t due within 12 months, and liabilities of ₩1.05t due beyond 12 months. Offsetting this, it had ₩514.3b in cash and ₩149.0b in receivables that were due within 12 months. So it has liabilities totalling ₩1.68t more than its cash and near-term receivables, combined.

Since publicly traded Ecopro BM shares are worth a total of ₩9.65t, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Ecopro BM's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

View our latest analysis for Ecopro BM

In the last year Ecopro BM had a loss before interest and tax, and actually shrunk its revenue by 60%, to ₩2.8t. That makes us nervous, to say the least.

Caveat Emptor

While Ecopro BM's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. To be specific the EBIT loss came in at ₩34b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled ₩360b in negative free cash flow over the last twelve months. So suffice it to say we do consider the stock to be risky. 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 1 warning sign for Ecopro BM you should know about.

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.