Is HLB TherapeuticsLtd (KOSDAQ:115450) A Risky Investment?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that HLB Therapeutics Co.,Ltd. (KOSDAQ:115450) does have debt on its balance sheet. But is this debt a concern to shareholders?

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. If things get really bad, the lenders can take control of the business. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

View our latest analysis for HLB TherapeuticsLtd

How Much Debt Does HLB TherapeuticsLtd Carry?

As you can see below, HLB TherapeuticsLtd had ₩20.6b of debt, at June 2024, which is about the same as the year before. You can click the chart for greater detail. However, its balance sheet shows it holds ₩46.4b in cash, so it actually has ₩25.8b net cash.

How Healthy Is HLB TherapeuticsLtd's Balance Sheet?

We can see from the most recent balance sheet that HLB TherapeuticsLtd had liabilities of ₩18.7b falling due within a year, and liabilities of ₩19.9b due beyond that. On the other hand, it had cash of ₩46.4b and ₩7.53b worth of receivables due within a year. So it can boast ₩15.3b more liquid assets than total liabilities.

This state of affairs indicates that HLB TherapeuticsLtd's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the ₩838.9b company is short on cash, but still worth keeping an eye on the balance sheet. Succinctly put, HLB TherapeuticsLtd boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is HLB TherapeuticsLtd'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.

Over 12 months, HLB TherapeuticsLtd reported revenue of ₩60b, which is a gain of 22%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is HLB TherapeuticsLtd?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months HLB TherapeuticsLtd lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through ₩9.6b of cash and made a loss of ₩26b. While this does make the company a bit risky, it's important to remember it has net cash of ₩25.8b. That means it could keep spending at its current rate for more than two years. HLB TherapeuticsLtd's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 2 warning signs for HLB TherapeuticsLtd that you should be aware of.

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.