Eutilex.Co.Ltd (KOSDAQ:263050) Has Debt But No Earnings; Should You Worry?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Eutilex.Co.,Ltd (KOSDAQ:263050) makes use of debt. But the more important question is: how much risk is that debt creating?

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Why Does Debt Bring Risk?

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. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Eutilex.Co.Ltd's Debt?

The image below, which you can click on for greater detail, shows that at December 2024 Eutilex.Co.Ltd had debt of ₩16.0b, up from ₩5.00b in one year. But on the other hand it also has ₩19.7b in cash, leading to a ₩3.68b net cash position.

A Look At Eutilex.Co.Ltd's Liabilities

Zooming in on the latest balance sheet data, we can see that Eutilex.Co.Ltd had liabilities of ₩18.0b due within 12 months and liabilities of ₩6.01b due beyond that. Offsetting this, it had ₩19.7b in cash and ₩2.04b in receivables that were due within 12 months. So it has liabilities totalling ₩2.33b more than its cash and near-term receivables, combined.

Since publicly traded Eutilex.Co.Ltd shares are worth a total of ₩53.7b, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, Eutilex.Co.Ltd 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 Eutilex.Co.Ltd will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot .

Check out our latest analysis for Eutilex.Co.Ltd

Over 12 months, Eutilex.Co.Ltd reported revenue of ₩9.5b, which is a gain of 7,136%, although it did not report any earnings before interest and tax. When it comes to revenue growth, that's like nailing the game winning 3-pointer!

So How Risky Is Eutilex.Co.Ltd?

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 Eutilex.Co.Ltd lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through ₩22b of cash and made a loss of ₩29b. With only ₩3.68b on the balance sheet, it would appear that its going to need to raise capital again soon. Importantly, Eutilex.Co.Ltd's revenue growth is hot to trot. While unprofitable companies can be risky, they can also grow hard and fast in those pre-profit years. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example Eutilex.Co.Ltd has 3 warning signs (and 2 which are a bit concerning) we think you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.