Is Hana Technology (KOSDAQ:299030) Using Too Much Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. Importantly, Hana Technology Co., Ltd. (KOSDAQ:299030) does carry 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 Hana Technology. Read for free now.

When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is Hana Technology's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of December 2024 Hana Technology had ₩96.1b of debt, an increase on ₩86.7b, over one year. On the flip side, it has ₩36.1b in cash leading to net debt of about ₩60.0b.

How Strong Is Hana Technology's Balance Sheet?

According to the last reported balance sheet, Hana Technology had liabilities of ₩114.7b due within 12 months, and liabilities of ₩27.4b due beyond 12 months. Offsetting these obligations, it had cash of ₩36.1b as well as receivables valued at ₩32.0b due within 12 months. So it has liabilities totalling ₩74.1b more than its cash and near-term receivables, combined.

While this might seem like a lot, it is not so bad since Hana Technology has a market capitalization of ₩145.2b, and so it could probably strengthen its balance sheet by raising capital if it needed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Hana Technology'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.

Check out our latest analysis for Hana Technology

Over 12 months, Hana Technology made a loss at the EBIT level, and saw its revenue drop to ₩94b, which is a fall of 21%. To be frank that doesn't bode well.

Caveat Emptor

While Hana Technology's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Its EBIT loss was a whopping ₩27b. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled ₩42b in negative free cash flow over the last twelve months. So in short it's a really risky stock. 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. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Hana Technology you should know about.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.