These 4 Measures Indicate That HYBE (KRX:352820) Is Using Debt Reasonably Well

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. As with many other companies HYBE Co., Ltd. (KRX:352820) makes use of debt. But the real question is whether this debt is making the company risky.

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is HYBE's Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 HYBE had ₩1.05t of debt, an increase on ₩855.1b, over one year. But on the other hand it also has ₩1.71t in cash, leading to a ₩663.3b net cash position.

How Healthy Is HYBE's Balance Sheet?

The latest balance sheet data shows that HYBE had liabilities of ₩731.1b due within a year, and liabilities of ₩1.42t falling due after that. Offsetting these obligations, it had cash of ₩1.71t as well as receivables valued at ₩322.0b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩119.5b.

This state of affairs indicates that HYBE's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the ₩13t company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, HYBE boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for HYBE

In fact HYBE's saving grace is its low debt levels, because its EBIT has tanked 49% in the last twelve months. When a company sees its earnings tank, it can sometimes find its relationships with its lenders turn sour. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine HYBE'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, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While HYBE has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. During the last three years, HYBE produced sturdy free cash flow equating to 79% of its EBIT, about what we'd expect. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that HYBE has ₩663.3b in net cash. And it impressed us with free cash flow of ₩101b, being 79% of its EBIT. So we are not troubled with HYBE's debt use. Even though HYBE lost money on the bottom line, its positive EBIT suggests the business itself has potential. So you might want to check out how earnings have been trending 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.

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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.