Does Fantagio (KOSDAQ:032800) Have A Healthy Balance Sheet?

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. We can see that Fantagio Corp. (KOSDAQ:032800) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt A Problem?

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. 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. 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. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Fantagio Carry?

As you can see below, at the end of March 2025, Fantagio had ₩14.0b of debt, up from ₩11.9b a year ago. Click the image for more detail. However, it does have ₩41.0b in cash offsetting this, leading to net cash of ₩27.1b.

How Strong Is Fantagio's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Fantagio had liabilities of ₩27.5b due within 12 months and liabilities of ₩2.99b due beyond that. Offsetting this, it had ₩41.0b in cash and ₩3.49b in receivables that were due within 12 months. So it can boast ₩14.0b more liquid assets than total liabilities.

This surplus liquidity suggests that Fantagio's balance sheet could take a hit just as well as Homer Simpson's head can take a punch. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Simply put, the fact that Fantagio has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is Fantagio'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.

View our latest analysis for Fantagio

Over 12 months, Fantagio made a loss at the EBIT level, and saw its revenue drop to ₩50b, which is a fall of 7.2%. We would much prefer see growth.

So How Risky Is Fantagio?

While Fantagio lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow ₩14b. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. The next few years will be important as the business matures. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example - Fantagio has 1 warning sign we think you should be aware of.

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.