Would BLUEMTEC (KOSDAQ:439580) Be Better Off With Less Debt?

Warren Buffett famously said, '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. As with many other companies BLUEMTEC Co., Ltd. (KOSDAQ:439580) makes use of debt. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

What Is BLUEMTEC's Net Debt?

As you can see below, at the end of March 2025, BLUEMTEC had ₩33.1b of debt, up from ₩30.1b a year ago. Click the image for more detail. However, because it has a cash reserve of ₩22.5b, its net debt is less, at about ₩10.5b.

A Look At BLUEMTEC's Liabilities

According to the last reported balance sheet, BLUEMTEC had liabilities of ₩52.0b due within 12 months, and liabilities of ₩11.8b due beyond 12 months. Offsetting these obligations, it had cash of ₩22.5b as well as receivables valued at ₩13.2b due within 12 months. So it has liabilities totalling ₩28.1b more than its cash and near-term receivables, combined.

Since publicly traded BLUEMTEC shares are worth a total of ₩175.9b, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. There's no doubt that we learn most about debt from the balance sheet. But it is BLUEMTEC'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 BLUEMTEC

In the last year BLUEMTEC wasn't profitable at an EBIT level, but managed to grow its revenue by 16%, to ₩140b. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Over the last twelve months BLUEMTEC produced an earnings before interest and tax (EBIT) loss. Indeed, it lost ₩6.3b 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. 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 ₩3.0b of cash over the last year. So suffice it to say we do consider the stock to be risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example - BLUEMTEC has 2 warning signs we think you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.