Is Young Poong Paper MfgLtd (KRX:006740) A Risky Investment?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 Young Poong Paper Mfg Co.,Ltd. (KRX:006740) makes use of debt. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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 step when considering a company's debt levels is to consider its cash and debt together.

What Is Young Poong Paper MfgLtd's Debt?

As you can see below, Young Poong Paper MfgLtd had ₩60.4b of debt, at March 2025, which is about the same as the year before. You can click the chart for greater detail. On the flip side, it has ₩18.9b in cash leading to net debt of about ₩41.5b.

How Healthy Is Young Poong Paper MfgLtd's Balance Sheet?

We can see from the most recent balance sheet that Young Poong Paper MfgLtd had liabilities of ₩71.4b falling due within a year, and liabilities of ₩4.20b due beyond that. On the other hand, it had cash of ₩18.9b and ₩10.9b worth of receivables due within a year. So its liabilities total ₩45.8b more than the combination of its cash and short-term receivables.

This is a mountain of leverage relative to its market capitalization of ₩60.3b. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. There's no doubt that we learn most about debt from the balance sheet. But it is Young Poong Paper MfgLtd'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 Young Poong Paper MfgLtd

Over 12 months, Young Poong Paper MfgLtd reported revenue of ₩89b, which is a gain of 5.1%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months Young Poong Paper MfgLtd produced an earnings before interest and tax (EBIT) loss. Its EBIT loss was a whopping ₩15b. 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. Another cause for caution is that is bled ₩18b in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. 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. These risks can be hard to spot. Every company has them, and we've spotted 5 warning signs for Young Poong Paper MfgLtd (of which 3 are concerning!) 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.