Is Icure Pharmaceutical Incorporation (KOSDAQ:175250) A Risky Investment?

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.' 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. We can see that Icure Pharmaceutical Incorporation (KOSDAQ:175250) does use debt in its business. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for Icure Pharmaceutical Incorporation

What Is Icure Pharmaceutical Incorporation's Debt?

The image below, which you can click on for greater detail, shows that at March 2024 Icure Pharmaceutical Incorporation had debt of ₩75.5b, up from ₩71.1b in one year. However, it also had ₩6.42b in cash, and so its net debt is ₩69.1b.

How Healthy Is Icure Pharmaceutical Incorporation's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Icure Pharmaceutical Incorporation had liabilities of ₩94.0b due within 12 months and liabilities of ₩11.4b due beyond that. Offsetting these obligations, it had cash of ₩6.42b as well as receivables valued at ₩10.0b due within 12 months. So it has liabilities totalling ₩89.0b more than its cash and near-term receivables, combined.

When you consider that this deficiency exceeds the company's ₩81.3b market capitalization, you might well be inclined to review the balance sheet intently. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Icure Pharmaceutical Incorporation will need earnings to service that debt. 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.

Over 12 months, Icure Pharmaceutical Incorporation made a loss at the EBIT level, and saw its revenue drop to ₩57b, which is a fall of 6.9%. That's not what we would hope to see.

Caveat Emptor

Over the last twelve months Icure Pharmaceutical Incorporation produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable ₩27b at the EBIT level. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it had negative free cash flow of ₩16b over the last twelve months. That means it's on the risky side of things. 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 4 warning signs we've spotted with Icure Pharmaceutical Incorporation (including 3 which are concerning) .

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.