BL Pharmtech (KOSDAQ:065170) Is Making Moderate Use Of Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies BL Pharmtech Corp. (KOSDAQ:065170) makes use of debt. But is this debt a concern to shareholders?

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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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. 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 BL Pharmtech Carry?

As you can see below, at the end of December 2024, BL Pharmtech had ₩5.17b of debt, up from ₩3.75b a year ago. Click the image for more detail. However, because it has a cash reserve of ₩3.86b, its net debt is less, at about ₩1.31b.

A Look At BL Pharmtech's Liabilities

We can see from the most recent balance sheet that BL Pharmtech had liabilities of ₩6.63b falling due within a year, and liabilities of ₩5.56b due beyond that. Offsetting this, it had ₩3.86b in cash and ₩983.6m in receivables that were due within 12 months. So it has liabilities totalling ₩7.34b more than its cash and near-term receivables, combined.

BL Pharmtech has a market capitalization of ₩29.1b, so it could very likely raise cash to ameliorate 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. The balance sheet is clearly the area to focus on when you are analysing debt. But it is BL Pharmtech'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 BL Pharmtech

Over 12 months, BL Pharmtech made a loss at the EBIT level, and saw its revenue drop to ₩8.8b, which is a fall of 64%. To be frank that doesn't bode well.

Caveat Emptor

While BL Pharmtech's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Its EBIT loss was a whopping ₩4.3b. 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. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through ₩5.2b of cash over the last year. So in short it's a really risky stock. 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. For instance, we've identified 3 warning signs for BL Pharmtech (2 make us uncomfortable) you should be aware of.

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.