Here's Why HLB (KOSDAQ:028300) Can Afford Some Debt

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. As with many other companies HLB Co., Ltd. (KOSDAQ:028300) makes use of debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does HLB Carry?

As you can see below, at the end of March 2025, HLB had ₩143.3b of debt, up from ₩80.3b a year ago. Click the image for more detail. However, it does have ₩84.1b in cash offsetting this, leading to net debt of about ₩59.2b.

A Look At HLB's Liabilities

We can see from the most recent balance sheet that HLB had liabilities of ₩197.8b falling due within a year, and liabilities of ₩43.1b due beyond that. On the other hand, it had cash of ₩84.1b and ₩17.2b worth of receivables due within a year. So its liabilities total ₩139.7b more than the combination of its cash and short-term receivables.

Given HLB has a market capitalization of ₩5.42t, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. But either way, HLB has virtually no net debt, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is HLB'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 HLB

In the last year HLB wasn't profitable at an EBIT level, but managed to grow its revenue by 118%, to ₩75b. So its pretty obvious shareholders are hoping for more growth!

Caveat Emptor

While we can certainly appreciate HLB's revenue growth, its earnings before interest and tax (EBIT) loss is not ideal. Indeed, it lost ₩112b at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled ₩135b in negative free cash flow over the last twelve months. So suffice it to say we do consider the stock to be risky. 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 - HLB has 2 warning signs we think you should be aware of.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.