Does YeSUN TechLtd (KOSDAQ:250930) Have A Healthy Balance Sheet?

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.' 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. Importantly, YeSUN Tech Co.,Ltd. (KOSDAQ:250930) does carry debt. But is this debt a concern to shareholders?

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

See our latest analysis for YeSUN TechLtd

What Is YeSUN TechLtd's Debt?

As you can see below, YeSUN TechLtd had ₩23.4b of debt, at March 2024, which is about the same as the year before. You can click the chart for greater detail. However, it also had ₩1.95b in cash, and so its net debt is ₩21.5b.

A Look At YeSUN TechLtd's Liabilities

The latest balance sheet data shows that YeSUN TechLtd had liabilities of ₩19.1b due within a year, and liabilities of ₩13.5b falling due after that. Offsetting these obligations, it had cash of ₩1.95b as well as receivables valued at ₩10.9b due within 12 months. So it has liabilities totalling ₩19.8b more than its cash and near-term receivables, combined.

Given this deficit is actually higher than the company's market capitalization of ₩19.7b, we think shareholders really should watch YeSUN TechLtd's debt levels, like a parent watching their child ride a bike for the first time. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. When analysing debt levels, the balance sheet is the obvious place to start. But it is YeSUN TechLtd's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

In the last year YeSUN TechLtd had a loss before interest and tax, and actually shrunk its revenue by 4.8%, to ₩45b. We would much prefer see growth.

Caveat Emptor

Over the last twelve months YeSUN TechLtd produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable ₩8.0b 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 ₩1.6b 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. For example, we've discovered 4 warning signs for YeSUN TechLtd (2 make us uncomfortable!) that you should be aware of before investing here.

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.