Hd Hyundai MipoLtd (KRX:010620) Has Debt But No Earnings; Should You Worry?

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. As with many other companies Hd Hyundai Mipo Co.,Ltd. (KRX:010620) makes use of debt. But the real question is whether this debt is making the company risky.

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

Check out our latest analysis for Hd Hyundai MipoLtd

How Much Debt Does Hd Hyundai MipoLtd Carry?

You can click the graphic below for the historical numbers, but it shows that Hd Hyundai MipoLtd had ₩174.6b of debt in September 2024, down from ₩362.9b, one year before. However, its balance sheet shows it holds ₩439.2b in cash, so it actually has ₩264.6b net cash.

How Strong Is Hd Hyundai MipoLtd's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Hd Hyundai MipoLtd had liabilities of ₩2.38t due within 12 months and liabilities of ₩144.0b due beyond that. On the other hand, it had cash of ₩439.2b and ₩63.3b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩2.02t.

While this might seem like a lot, it is not so bad since Hd Hyundai MipoLtd has a market capitalization of ₩4.34t, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. While it does have liabilities worth noting, Hd Hyundai MipoLtd also has more cash than debt, so we're pretty confident 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 Hd Hyundai MipoLtd'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.

In the last year Hd Hyundai MipoLtd wasn't profitable at an EBIT level, but managed to grow its revenue by 8.9%, to ₩4.3t. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Hd Hyundai MipoLtd?

While Hd Hyundai MipoLtd lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow ₩165b. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. With revenue growth uninspiring, we'd really need to see some positive EBIT before mustering much enthusiasm for this business. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how Hd Hyundai MipoLtd's profit, revenue, and operating cashflow have changed over the last few years.

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.