We Think Icure Pharmaceutical Incorporation (KOSDAQ:175250) Has A Fair Chunk Of Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Icure Pharmaceutical Incorporation (KOSDAQ:175250) makes use of debt. But the real question is whether this debt is making the company risky.

When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for Icure Pharmaceutical Incorporation

What Is Icure Pharmaceutical Incorporation's Debt?

As you can see below, Icure Pharmaceutical Incorporation had ₩59.1b of debt at September 2020, down from ₩68.0b a year prior. However, because it has a cash reserve of ₩23.5b, its net debt is less, at about ₩35.7b.

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 ₩32.7b due within 12 months and liabilities of ₩48.5b due beyond that. Offsetting this, it had ₩23.5b in cash and ₩17.0b in receivables that were due within 12 months. So it has liabilities totalling ₩40.7b more than its cash and near-term receivables, combined.

Given Icure Pharmaceutical Incorporation has a market capitalization of ₩454.7b, 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. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Icure Pharmaceutical Incorporation's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

In the last year Icure Pharmaceutical Incorporation wasn't profitable at an EBIT level, but managed to grow its revenue by 75%, to ₩88b. Shareholders probably have their fingers crossed that it can grow its way to profits.

Caveat Emptor

Even though Icure Pharmaceutical Incorporation managed to grow its top line quite deftly, the cold hard truth is that it is losing money on the EBIT line. Indeed, it lost ₩11b at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through ₩43b of cash over the last year. So suffice it to say we consider the stock very risky. 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. To that end, you should be aware of the 3 warning signs we've spotted with Icure Pharmaceutical Incorporation .

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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