Here's Why From BioLtd (KOSDAQ:377220) Can Afford Some Debt

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. As with many other companies From Bio Co.,Ltd (KOSDAQ:377220) makes use of debt. But the more important question is: how much risk is that debt creating?

Our free stock report includes 2 warning signs investors should be aware of before investing in From BioLtd. Read for free now.

When Is Debt Dangerous?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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 think about a company's use of debt, we first look at cash and debt together.

What Is From BioLtd's Debt?

As you can see below, at the end of December 2024, From BioLtd had ₩26.3b of debt, up from ₩18.4b a year ago. Click the image for more detail. However, because it has a cash reserve of ₩2.98b, its net debt is less, at about ₩23.3b.

How Strong Is From BioLtd's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that From BioLtd had liabilities of ₩27.2b due within 12 months and liabilities of ₩4.89b due beyond that. On the other hand, it had cash of ₩2.98b and ₩3.06b worth of receivables due within a year. So its liabilities total ₩26.0b more than the combination of its cash and short-term receivables.

From BioLtd has a market capitalization of ₩58.2b, 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. When analysing debt levels, the balance sheet is the obvious place to start. But it is From BioLtd's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for From BioLtd

Over 12 months, From BioLtd saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that hardly impresses, its not too bad either.

Caveat Emptor

Importantly, From BioLtd had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping ₩24b. 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 ₩14b of cash over the last year. So in short it's a really 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. For example From BioLtd has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

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.