Is Wysiwyg Studios (KOSDAQ:299900) Weighed On By Its Debt Load?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. Importantly, Wysiwyg Studios Co., Ltd. (KOSDAQ:299900) does carry debt. But is this debt a concern to shareholders?

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. 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 Wysiwyg Studios's Debt?

The chart below, which you can click on for greater detail, shows that Wysiwyg Studios had ₩7.55b in debt in December 2024; about the same as the year before. However, its balance sheet shows it holds ₩42.8b in cash, so it actually has ₩35.2b net cash.

How Healthy Is Wysiwyg Studios' Balance Sheet?

According to the last reported balance sheet, Wysiwyg Studios had liabilities of ₩73.4b due within 12 months, and liabilities of ₩6.23b due beyond 12 months. Offsetting this, it had ₩42.8b in cash and ₩10.7b in receivables that were due within 12 months. So it has liabilities totalling ₩26.2b more than its cash and near-term receivables, combined.

Since publicly traded Wysiwyg Studios shares are worth a total of ₩196.7b, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, Wysiwyg Studios also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is Wysiwyg Studios'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.

See our latest analysis for Wysiwyg Studios

Over 12 months, Wysiwyg Studios made a loss at the EBIT level, and saw its revenue drop to ₩80b, which is a fall of 45%. To be frank that doesn't bode well.

So How Risky Is Wysiwyg Studios?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that Wysiwyg Studios had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of ₩8.8b and booked a ₩55b accounting loss. Given it only has net cash of ₩35.2b, the company may need to raise more capital if it doesn't reach break-even soon. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how Wysiwyg Studios's profit, revenue, and operating cashflow have changed over the last few years.

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.

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.