Is Seoul Broadcasting System (KRX:034120) A Risky Investment?

Warren Buffett famously said, '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. We note that Seoul Broadcasting System (KRX:034120) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

When Is Debt A Problem?

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. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for Seoul Broadcasting System

What Is Seoul Broadcasting System's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2024 Seoul Broadcasting System had ₩357.7b of debt, an increase on ₩201.7b, over one year. But it also has ₩374.4b in cash to offset that, meaning it has ₩16.7b net cash.

A Look At Seoul Broadcasting System's Liabilities

Zooming in on the latest balance sheet data, we can see that Seoul Broadcasting System had liabilities of ₩345.5b due within 12 months and liabilities of ₩262.5b due beyond that. On the other hand, it had cash of ₩374.4b and ₩255.1b worth of receivables due within a year. So it can boast ₩21.4b more liquid assets than total liabilities.

This surplus suggests that Seoul Broadcasting System has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Seoul Broadcasting System boasts net cash, so it's fair to say it does not have a heavy debt load! 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 Seoul Broadcasting System'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.

Over 12 months, Seoul Broadcasting System made a loss at the EBIT level, and saw its revenue drop to ₩1.1t, which is a fall of 3.3%. We would much prefer see growth.

So How Risky Is Seoul Broadcasting System?

Although Seoul Broadcasting System had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of ₩1.1b. So when you consider it has net cash, along with the statutory profit, the stock probably isn't as risky as it might seem, at least in the short term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. 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, we've discovered 4 warning signs for Seoul Broadcasting System (1 shouldn't be ignored!) that you should be aware of before investing here.

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.

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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.