Hyundai Rotem (KRX:064350) Has A Rock Solid Balance Sheet

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. As with many other companies Hyundai Rotem Company (KRX:064350) makes use of debt. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

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. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Hyundai Rotem's Debt?

You can click the graphic below for the historical numbers, but it shows that Hyundai Rotem had ₩90.0b of debt in June 2025, down from ₩409.7b, one year before. But on the other hand it also has ₩1.13t in cash, leading to a ₩1.04t net cash position.

How Healthy Is Hyundai Rotem's Balance Sheet?

According to the last reported balance sheet, Hyundai Rotem had liabilities of ₩3.19t due within 12 months, and liabilities of ₩369.3b due beyond 12 months. Offsetting these obligations, it had cash of ₩1.13t as well as receivables valued at ₩789.6b due within 12 months. So it has liabilities totalling ₩1.64t more than its cash and near-term receivables, combined.

Since publicly traded Hyundai Rotem shares are worth a very impressive total of ₩22t, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, Hyundai Rotem also has more cash than debt, so we're pretty confident it can manage its debt safely.

Check out our latest analysis for Hyundai Rotem

Better yet, Hyundai Rotem grew its EBIT by 183% last year, which is an impressive improvement. If maintained that growth will make the debt even more manageable in the years ahead. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Hyundai Rotem'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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Hyundai Rotem may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Happily for any shareholders, Hyundai Rotem actually produced more free cash flow than EBIT over the last three years. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

We could understand if investors are concerned about Hyundai Rotem's liabilities, but we can be reassured by the fact it has has net cash of ₩1.04t. The cherry on top was that in converted 147% of that EBIT to free cash flow, bringing in ₩582b. So we don't think Hyundai Rotem's use of debt is risky. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of Hyundai Rotem's earnings per share history for free.

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.