These 4 Measures Indicate That ORION Holdings (KRX:001800) Is Using Debt Safely

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. Importantly, ORION Holdings Corp. (KRX:001800) does carry debt. But should shareholders be worried about its use of debt?

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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. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does ORION Holdings Carry?

The image below, which you can click on for greater detail, shows that at March 2025 ORION Holdings had debt of ₩154.4b, up from ₩92.7b in one year. But it also has ₩1.13t in cash to offset that, meaning it has ₩977.6b net cash.

How Strong Is ORION Holdings' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that ORION Holdings had liabilities of ₩669.9b due within 12 months and liabilities of ₩340.2b due beyond that. Offsetting these obligations, it had cash of ₩1.13t as well as receivables valued at ₩206.4b due within 12 months. So it actually has ₩328.4b more liquid assets than total liabilities.

This surplus suggests that ORION Holdings is using debt in a way that is appears to be both safe and conservative. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, ORION Holdings boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for ORION Holdings

Fortunately, ORION Holdings grew its EBIT by 9.4% in the last year, making that debt load look even more manageable. There's no doubt that we learn most about debt from the balance sheet. But it is ORION Holdings'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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. ORION Holdings 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. Over the last three years, ORION Holdings recorded free cash flow worth a fulsome 86% of its EBIT, which is stronger than we'd usually expect. That positions it well to pay down debt if desirable to do so.

Summing Up

While it is always sensible to investigate a company's debt, in this case ORION Holdings has ₩977.6b in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of ₩382b, being 86% of its EBIT. So is ORION Holdings's debt a risk? It doesn't seem so to us. 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. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for ORION Holdings you should know about.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.