Is Woongjin Thinkbig (KRX:095720) Using Debt Sensibly?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. As with many other companies Woongjin Thinkbig Co., Ltd. (KRX:095720) makes use of debt. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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. 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 Woongjin Thinkbig's Net Debt?

The chart below, which you can click on for greater detail, shows that Woongjin Thinkbig had ₩136.9b in debt in March 2025; about the same as the year before. However, it does have ₩35.5b in cash offsetting this, leading to net debt of about ₩101.4b.

How Strong Is Woongjin Thinkbig's Balance Sheet?

The latest balance sheet data shows that Woongjin Thinkbig had liabilities of ₩353.3b due within a year, and liabilities of ₩30.9b falling due after that. Offsetting these obligations, it had cash of ₩35.5b as well as receivables valued at ₩149.9b due within 12 months. So its liabilities total ₩198.8b more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of ₩236.1b, so it does suggest shareholders should keep an eye on Woongjin Thinkbig's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Woongjin Thinkbig can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

View our latest analysis for Woongjin Thinkbig

In the last year Woongjin Thinkbig had a loss before interest and tax, and actually shrunk its revenue by 3.9%, to ₩848b. That's not what we would hope to see.

Caveat Emptor

Importantly, Woongjin Thinkbig had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at ₩622m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. We would feel better if it turned its trailing twelve month loss of ₩25b into a profit. In the meantime, we consider the stock very risky. 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 1 warning sign for Woongjin Thinkbig that you should be aware of before investing here.

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.

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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.