Is SyntekaBio (KOSDAQ:226330) Using Debt Sensibly?

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.' 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 can see that SyntekaBio, Inc. (KOSDAQ:226330) does use debt in its business. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is SyntekaBio's Debt?

As you can see below, at the end of December 2024, SyntekaBio had ₩7.28b of debt, up from ₩1.80b a year ago. Click the image for more detail. But on the other hand it also has ₩12.1b in cash, leading to a ₩4.79b net cash position.

How Healthy Is SyntekaBio's Balance Sheet?

We can see from the most recent balance sheet that SyntekaBio had liabilities of ₩16.3b falling due within a year, and liabilities of ₩2.47b due beyond that. On the other hand, it had cash of ₩12.1b and ₩186.7k worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩6.71b.

Given SyntekaBio has a market capitalization of ₩117.5b, 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. While it does have liabilities worth noting, SyntekaBio also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine SyntekaBio's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts .

Check out our latest analysis for SyntekaBio

In the last year SyntekaBio had a loss before interest and tax, and actually shrunk its revenue by 2.0%, to ₩121m. We would much prefer see growth.

So How Risky Is SyntekaBio?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months SyntekaBio lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through ₩16b of cash and made a loss of ₩7.2b. With only ₩4.79b on the balance sheet, it would appear that its going to need to raise capital again soon. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. When analysing debt levels, the balance sheet is the obvious place to start. 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 5 warning signs for SyntekaBio (of which 4 are potentially serious!) you should know about.

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.