Does OSP (KOSDAQ:368970) Have A Healthy Balance Sheet?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 can see that OSP Co., Ltd. (KOSDAQ:368970) does use debt in its business. But is this debt a concern to shareholders?

Our free stock report includes 3 warning signs investors should be aware of before investing in OSP. Read for free now.

What Risk Does Debt Bring?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does OSP Carry?

As you can see below, OSP had ₩16.7b of debt at March 2025, down from ₩17.5b a year prior. However, because it has a cash reserve of ₩12.4b, its net debt is less, at about ₩4.33b.

How Strong Is OSP's Balance Sheet?

We can see from the most recent balance sheet that OSP had liabilities of ₩17.5b falling due within a year, and liabilities of ₩4.10b due beyond that. On the other hand, it had cash of ₩12.4b and ₩3.78b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩5.40b.

Of course, OSP has a market capitalization of ₩29.4b, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. When analysing debt levels, the balance sheet is the obvious place to start. But it is OSP's earnings that will influence how the balance sheet holds up in the future. 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.

View our latest analysis for OSP

Over 12 months, OSP made a loss at the EBIT level, and saw its revenue drop to ₩27b, which is a fall of 29%. That makes us nervous, to say the least.

Caveat Emptor

While OSP's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. To be specific the EBIT loss came in at ₩1.2b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through ₩13m of cash over the last year. So suffice it to say we do consider the stock to be risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 3 warning signs for OSP (1 is a bit concerning) you should be aware of.

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.