Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 MEDIPOST Co., Ltd. (KOSDAQ:078160) makes use of debt. But the real question is whether this debt is making the company risky.
What Risk Does Debt Bring?
Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.
View our latest analysis for MEDIPOST
What Is MEDIPOST's Debt?
As you can see below, MEDIPOST had ₩9.99b of debt at March 2024, down from ₩50.2b a year prior. But on the other hand it also has ₩155.5b in cash, leading to a ₩145.5b net cash position.
A Look At MEDIPOST's Liabilities
We can see from the most recent balance sheet that MEDIPOST had liabilities of ₩19.3b falling due within a year, and liabilities of ₩75.2b due beyond that. On the other hand, it had cash of ₩155.5b and ₩14.7b worth of receivables due within a year. So it actually has ₩75.8b more liquid assets than total liabilities.
This luscious liquidity implies that MEDIPOST's balance sheet is sturdy like a giant sequoia tree. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Succinctly put, MEDIPOST boasts net cash, 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 you can't view debt in total isolation; since MEDIPOST will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.
Over 12 months, MEDIPOST reported revenue of ₩69b, which is a gain of 4.2%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.
So How Risky Is MEDIPOST?
While MEDIPOST lost money on an earnings before interest and tax (EBIT) level, it actually booked a paper profit of ₩5.3b. So taking that on face value, and considering the cash, we don't think its very risky in the near term. With mediocre revenue growth in the last year, we're don't find the investment opportunity particularly compelling. 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. Case in point: We've spotted 2 warning signs for MEDIPOST you should be aware of, and 1 of them makes us a bit uncomfortable.
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.
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About KOSDAQ:A078160
MEDIPOST
Engages in the cord blood bank business in South Korea and internationally.
Adequate balance sheet low.
