Is NS ENMLtd (KOSDAQ:078860) 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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that NS ENM Co.,Ltd. (KOSDAQ:078860) does use debt in its business. But should shareholders be worried about its use of debt?

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Why Does Debt Bring Risk?

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. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is NS ENMLtd's Net Debt?

The image below, which you can click on for greater detail, shows that NS ENMLtd had debt of ₩7.48b at the end of June 2025, a reduction from ₩19.3b over a year. However, it also had ₩7.31b in cash, and so its net debt is ₩171.8m.

A Look At NS ENMLtd's Liabilities

The latest balance sheet data shows that NS ENMLtd had liabilities of ₩18.9b due within a year, and liabilities of ₩515.3m falling due after that. Offsetting this, it had ₩7.31b in cash and ₩14.3b in receivables that were due within 12 months. So it actually has ₩2.17b more liquid assets than total liabilities.

This surplus suggests that NS ENMLtd has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Carrying virtually no net debt, NS ENMLtd has a very light debt load indeed. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since NS ENMLtd will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for NS ENMLtd

Over 12 months, NS ENMLtd reported revenue of ₩25b, which is a gain of 29%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.

Caveat Emptor

Despite the top line growth, NS ENMLtd still had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping ₩10b. Looking on the brighter side, the business has adequate liquid assets, which give it time to grow and develop before its debt becomes a near-term issue. But we'd want to see some positive free cashflow before spending much time on trying to understand the stock. So it seems too risky for our taste. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example NS ENMLtd has 4 warning signs (and 2 which are a bit concerning) we think you should know about.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.