Is Foosung (KRX:093370) 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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. As with many other companies Foosung Co., Ltd. (KRX:093370) makes use of debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Foosung's Net Debt?

The chart below, which you can click on for greater detail, shows that Foosung had ₩400.8b in debt in March 2025; about the same as the year before. However, it also had ₩150.6b in cash, and so its net debt is ₩250.1b.

How Strong Is Foosung's Balance Sheet?

We can see from the most recent balance sheet that Foosung had liabilities of ₩338.2b falling due within a year, and liabilities of ₩156.7b due beyond that. On the other hand, it had cash of ₩150.6b and ₩68.9b worth of receivables due within a year. So it has liabilities totalling ₩275.4b more than its cash and near-term receivables, combined.

This deficit isn't so bad because Foosung is worth ₩626.4b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Foosung can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

View our latest analysis for Foosung

In the last year Foosung had a loss before interest and tax, and actually shrunk its revenue by 8.8%, to ₩436b. We would much prefer see growth.

Caveat Emptor

Importantly, Foosung had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at ₩253m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any 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 ₩46m of cash over the last year. So to be blunt we think it is 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. For example, we've discovered 1 warning sign for Foosung 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.