HvmLtd (KOSDAQ:295310) Is Carrying A Fair Bit Of Debt

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.' 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. Importantly, Hvm, Co.,Ltd. (KOSDAQ:295310) does carry debt. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is HvmLtd's Debt?

As you can see below, HvmLtd had ₩33.7b of debt at March 2025, down from ₩35.4b a year prior. On the flip side, it has ₩4.43b in cash leading to net debt of about ₩29.3b.

How Strong Is HvmLtd's Balance Sheet?

According to the last reported balance sheet, HvmLtd had liabilities of ₩38.7b due within 12 months, and liabilities of ₩15.1b due beyond 12 months. Offsetting these obligations, it had cash of ₩4.43b as well as receivables valued at ₩10.8b due within 12 months. So it has liabilities totalling ₩38.5b more than its cash and near-term receivables, combined.

Given HvmLtd has a market capitalization of ₩355.9b, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. 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 HvmLtd'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.

Check out our latest analysis for HvmLtd

In the last year HvmLtd wasn't profitable at an EBIT level, but managed to grow its revenue by 26%, to ₩50b. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Despite the top line growth, HvmLtd still had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost ₩6.3b 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. 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 ₩38b of cash over the last year. So in short it's a really risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that HvmLtd is showing 1 warning sign in our investment analysis , you should know about...

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.