COWINTECH (KOSDAQ:282880) Has Debt But No Earnings; Should You Worry?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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. Importantly, COWINTECH Co. Ltd. (KOSDAQ:282880) does carry debt. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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.

How Much Debt Does COWINTECH Carry?

The image below, which you can click on for greater detail, shows that at June 2025 COWINTECH had debt of ₩73.9b, up from ₩61.7b in one year. However, it does have ₩84.0b in cash offsetting this, leading to net cash of ₩10.1b.

A Look At COWINTECH's Liabilities

Zooming in on the latest balance sheet data, we can see that COWINTECH had liabilities of ₩111.2b due within 12 months and liabilities of ₩45.6b due beyond that. Offsetting this, it had ₩84.0b in cash and ₩131.3b in receivables that were due within 12 months. So it can boast ₩58.6b more liquid assets than total liabilities.

It's good to see that COWINTECH has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Due to its strong net asset position, it is not likely to face issues with its lenders. Simply put, the fact that COWINTECH has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine COWINTECH'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.

See our latest analysis for COWINTECH

Over 12 months, COWINTECH made a loss at the EBIT level, and saw its revenue drop to ₩196b, which is a fall of 33%. That makes us nervous, to say the least.

So How Risky Is COWINTECH?

While COWINTECH lost money on an earnings before interest and tax (EBIT) level, it actually booked a paper profit of ₩3.4b. So taking that on face value, and considering the cash, we don't think its very risky in the near term. With mediocre revenue growth in the last year, we're don't find the investment opportunity particularly compelling. 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. Be aware that COWINTECH is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

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.