Is IntoCell (KOSDAQ:287840) Using Too Much Debt?

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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that IntoCell, Inc. (KOSDAQ:287840) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt A Problem?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is IntoCell's Net Debt?

The chart below, which you can click on for greater detail, shows that IntoCell had ₩10.0b in debt in March 2025; about the same as the year before. However, its balance sheet shows it holds ₩10.6b in cash, so it actually has ₩554.0m net cash.

How Healthy Is IntoCell's Balance Sheet?

The latest balance sheet data shows that IntoCell had liabilities of ₩15.5b due within a year, and liabilities of ₩3.13b falling due after that. On the other hand, it had cash of ₩10.6b and ₩1.78b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩6.28b.

Having regard to IntoCell's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the ₩425.4b company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, IntoCell boasts net cash, so it's fair to say it does not have a heavy debt load! 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 IntoCell can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

See our latest analysis for IntoCell

In the last year IntoCell wasn't profitable at an EBIT level, but managed to grow its revenue by 177%, to ₩2.9b. So its pretty obvious shareholders are hoping for more growth!

So How Risky Is IntoCell?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year IntoCell had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through ₩8.7b of cash and made a loss of ₩8.9b. But at least it has ₩554.0m on the balance sheet to spend on growth, near-term. Importantly, IntoCell's revenue growth is hot to trot. High growth pre-profit companies may well be risky, but they can also offer great 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 example, we've discovered 3 warning signs for IntoCell (2 are significant!) that you should be aware of before investing here.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.