Is SAMG Entertainment (KOSDAQ:419530) Using Too Much Debt?

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 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 can see that SAMG Entertainment Co., Ltd. (KOSDAQ:419530) does use debt in its business. But the more important question is: how much risk is that debt creating?

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

Why Does Debt Bring Risk?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is SAMG Entertainment's Debt?

You can click the graphic below for the historical numbers, but it shows that SAMG Entertainment had ₩24.6b of debt in March 2025, down from ₩26.1b, one year before. But it also has ₩47.5b in cash to offset that, meaning it has ₩23.0b net cash.

How Healthy Is SAMG Entertainment's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that SAMG Entertainment had liabilities of ₩44.0b due within 12 months and liabilities of ₩16.9b due beyond that. Offsetting these obligations, it had cash of ₩47.5b as well as receivables valued at ₩10.7b due within 12 months. So it has liabilities totalling ₩2.71b more than its cash and near-term receivables, combined.

Having regard to SAMG Entertainment's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the ₩726.3b company is short on cash, but still worth keeping an eye on the balance sheet. Despite its noteworthy liabilities, SAMG Entertainment boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for SAMG Entertainment

Notably, SAMG Entertainment made a loss at the EBIT level, last year, but improved that to positive EBIT of ₩6.0b in the last twelve months. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine SAMG Entertainment's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. SAMG Entertainment may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last year, SAMG Entertainment actually produced more free cash flow than EBIT. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

We could understand if investors are concerned about SAMG Entertainment's liabilities, but we can be reassured by the fact it has has net cash of ₩23.0b. The cherry on top was that in converted 400% of that EBIT to free cash flow, bringing in ₩24b. So we are not troubled with SAMG Entertainment's debt use. 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. To that end, you should be aware of the 1 warning sign we've spotted with SAMG Entertainment .

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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.