Is Hyundai Engineering & ConstructionLtd (KRX:000720) Weighed On By Its Debt Load?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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. As with many other companies Hyundai Engineering & Construction Co.,Ltd. (KRX:000720) makes use of debt. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Hyundai Engineering & ConstructionLtd's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Hyundai Engineering & ConstructionLtd had debt of ₩3.39t, up from ₩2.62t in one year. But on the other hand it also has ₩3.55t in cash, leading to a ₩164.0b net cash position.

How Strong Is Hyundai Engineering & ConstructionLtd's Balance Sheet?

The latest balance sheet data shows that Hyundai Engineering & ConstructionLtd had liabilities of ₩14t due within a year, and liabilities of ₩2.31t falling due after that. Offsetting this, it had ₩3.55t in cash and ₩12t in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩350.5b.

Since publicly traded Hyundai Engineering & ConstructionLtd shares are worth a total of ₩6.31t, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, Hyundai Engineering & ConstructionLtd boasts net cash, so it's fair to say it does not have a heavy debt load! 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 Hyundai Engineering & ConstructionLtd'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.

See our latest analysis for Hyundai Engineering & ConstructionLtd

In the last year Hyundai Engineering & ConstructionLtd had a loss before interest and tax, and actually shrunk its revenue by 8.8%, to ₩31t. That's not what we would hope to see.

So How Risky Is Hyundai Engineering & ConstructionLtd?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Hyundai Engineering & ConstructionLtd had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through ₩803b of cash and made a loss of ₩258b. Given it only has net cash of ₩164.0b, the company may need to raise more capital if it doesn't reach break-even soon. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. For riskier companies like Hyundai Engineering & ConstructionLtd I always like to keep an eye on the long term profit and revenue trends. Fortunately, you can click to see our interactive graph of its profit, revenue, and operating cashflow.

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.