Is Laseroptek (KOSDAQ:199550) Using Too Much Debt?

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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Laseroptek Co., Ltd. (KOSDAQ:199550) does use debt in its business. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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.

What Is Laseroptek's Net Debt?

The image below, which you can click on for greater detail, shows that at March 2025 Laseroptek had debt of ₩5.48b, up from ₩4.33b in one year. But it also has ₩10.4b in cash to offset that, meaning it has ₩4.91b net cash.

How Strong Is Laseroptek's Balance Sheet?

The latest balance sheet data shows that Laseroptek had liabilities of ₩9.45b due within a year, and liabilities of ₩3.87b falling due after that. On the other hand, it had cash of ₩10.4b and ₩12.6b worth of receivables due within a year. So it can boast ₩9.64b more liquid assets than total liabilities.

This surplus suggests that Laseroptek has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Laseroptek has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is Laseroptek'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 Laseroptek

Over 12 months, Laseroptek made a loss at the EBIT level, and saw its revenue drop to ₩30b, which is a fall of 14%. We would much prefer see growth.

So How Risky Is Laseroptek?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that Laseroptek had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of ₩3.4b and booked a ₩949m accounting loss. But the saving grace is the ₩4.91b on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. To that end, you should learn about the 3 warning signs we've spotted with Laseroptek (including 1 which is a bit unpleasant) .

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.