Is In the FLTD (KRX:014990) Weighed On By Its Debt Load?

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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that In the F CO.,LTD. (KRX:014990) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for In the FLTD

How Much Debt Does In the FLTD Carry?

You can click the graphic below for the historical numbers, but it shows that as of September 2024 In the FLTD had ₩38.5b of debt, an increase on ₩33.3b, over one year. On the flip side, it has ₩3.30b in cash leading to net debt of about ₩35.2b.

How Strong Is In the FLTD's Balance Sheet?

The latest balance sheet data shows that In the FLTD had liabilities of ₩47.3b due within a year, and liabilities of ₩33.8b falling due after that. Offsetting this, it had ₩3.30b in cash and ₩8.57b in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩69.2b.

When you consider that this deficiency exceeds the company's ₩67.6b market capitalization, you might well be inclined to review the balance sheet intently. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since In the FLTD will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Over 12 months, In the FLTD made a loss at the EBIT level, and saw its revenue drop to ₩117b, which is a fall of 8.7%. We would much prefer see growth.

Caveat Emptor

Importantly, In the FLTD had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost ₩587m at the EBIT level. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. For example, we would not want to see a repeat of last year's loss of ₩44m. And until that time we think this is a 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. To that end, you should learn about the 2 warning signs we've spotted with In the FLTD (including 1 which is a bit concerning) .

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.