Is Mr. Blue (KOSDAQ:207760) Using Debt In A Risky Way?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. We note that Mr. Blue Corporation (KOSDAQ:207760) does have debt on its balance sheet. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Mr. Blue's Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Mr. Blue had debt of ₩5.13b, up from ₩4.69b in one year. However, its balance sheet shows it holds ₩27.0b in cash, so it actually has ₩21.9b net cash.

How Strong Is Mr. Blue's Balance Sheet?

We can see from the most recent balance sheet that Mr. Blue had liabilities of ₩26.8b falling due within a year, and liabilities of ₩4.43b due beyond that. Offsetting these obligations, it had cash of ₩27.0b as well as receivables valued at ₩6.03b due within 12 months. So it can boast ₩1.84b more liquid assets than total liabilities.

Having regard to Mr. Blue's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the ₩119.2b company is short on cash, but still worth keeping an eye on the balance sheet. Succinctly put, Mr. Blue boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is Mr. Blue'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.

See our latest analysis for Mr. Blue

Over 12 months, Mr. Blue reported revenue of ₩72b, which is a gain of 6.1%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Mr. Blue?

While Mr. Blue lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow ₩192m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 3 warning signs we've spotted with Mr. Blue (including 1 which is potentially serious) .

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.