Is TegoScience (KOSDAQ:191420) Using Debt In A Risky Way?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. Importantly, TegoScience Inc. (KOSDAQ:191420) does carry debt. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

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. If things get really bad, the lenders can take control of the business. 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, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is TegoScience's Debt?

The image below, which you can click on for greater detail, shows that at June 2025 TegoScience had debt of ₩15.1b, up from ₩1.44b in one year. However, it does have ₩53.5b in cash offsetting this, leading to net cash of ₩38.4b.

How Strong Is TegoScience's Balance Sheet?

The latest balance sheet data shows that TegoScience had liabilities of ₩2.11b due within a year, and liabilities of ₩22.1b falling due after that. On the other hand, it had cash of ₩53.5b and ₩2.60b worth of receivables due within a year. So it can boast ₩31.9b more liquid assets than total liabilities.

This surplus suggests that TegoScience is using debt in a way that is appears to be both safe and conservative. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, TegoScience 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 you can't view debt in total isolation; since TegoScience will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Check out our latest analysis for TegoScience

In the last year TegoScience had a loss before interest and tax, and actually shrunk its revenue by 6.6%, to ₩6.5b. We would much prefer see growth.

So How Risky Is TegoScience?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that TegoScience had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of ₩2.0b and booked a ₩1.9b accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of ₩38.4b. That kitty means the company can keep spending for growth for at least two years, at current rates. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. 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 - TegoScience has 1 warning sign we think you should be aware of.

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.