Is DRTECH (KOSDAQ:214680) Using Too Much Debt?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that DRTECH Corporation (KOSDAQ:214680) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does DRTECH Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 DRTECH had ₩68.2b of debt, an increase on ₩36.7b, over one year. On the flip side, it has ₩38.2b in cash leading to net debt of about ₩30.0b.

How Strong Is DRTECH's Balance Sheet?

We can see from the most recent balance sheet that DRTECH had liabilities of ₩64.7b falling due within a year, and liabilities of ₩67.0b due beyond that. Offsetting these obligations, it had cash of ₩38.2b as well as receivables valued at ₩49.7b due within 12 months. So it has liabilities totalling ₩43.8b more than its cash and near-term receivables, combined.

This deficit isn't so bad because DRTECH is worth ₩135.0b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. There's no doubt that we learn most about debt from the balance sheet. But it is DRTECH'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.

See our latest analysis for DRTECH

In the last year DRTECH wasn't profitable at an EBIT level, but managed to grow its revenue by 22%, to ₩106b. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Even though DRTECH managed to grow its top line quite deftly, the cold hard truth is that it is losing money on the EBIT line. To be specific the EBIT loss came in at ₩11b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through ₩23b of cash over the last year. So in short it's a really risky stock. 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. Be aware that DRTECH is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

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.