These 4 Measures Indicate That Samsung C&T (KRX:028260) Is Using Debt Reasonably Well

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. Importantly, Samsung C&T Corporation (KRX:028260) does carry debt. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Samsung C&T's Net Debt?

The image below, which you can click on for greater detail, shows that Samsung C&T had debt of ₩3.45t at the end of June 2025, a reduction from ₩4.73t over a year. But on the other hand it also has ₩5.24t in cash, leading to a ₩1.79t net cash position.

How Healthy Is Samsung C&T's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Samsung C&T had liabilities of ₩13t due within 12 months and liabilities of ₩11t due beyond that. Offsetting these obligations, it had cash of ₩5.24t as well as receivables valued at ₩6.88t due within 12 months. So its liabilities total ₩12t more than the combination of its cash and short-term receivables.

Samsung C&T has a very large market capitalization of ₩31t, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. While it does have liabilities worth noting, Samsung C&T also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Samsung C&T

On the other hand, Samsung C&T saw its EBIT drop by 7.3% in the last twelve months. That sort of decline, if sustained, will obviously make debt harder to handle. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Samsung C&T'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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Samsung C&T has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the most recent three years, Samsung C&T recorded free cash flow worth 70% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

While Samsung C&T does have more liabilities than liquid assets, it also has net cash of ₩1.79t. And it impressed us with free cash flow of ₩1.8t, being 70% of its EBIT. So we don't have any problem with Samsung C&T's use of debt. 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. For example, we've discovered 1 warning sign for Samsung C&T that you should be aware of before investing here.

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.