Is Aptamer Sciences (KOSDAQ:291650) A Risky Investment?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the 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. Importantly, Aptamer Sciences Inc (KOSDAQ:291650) does carry debt. But the more important question is: how much risk is that debt creating?

What Risk Does Debt Bring?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for Aptamer Sciences

What Is Aptamer Sciences's Debt?

You can click the graphic below for the historical numbers, but it shows that as of December 2023 Aptamer Sciences had ₩8.23b of debt, an increase on ₩6.84b, over one year. However, it does have ₩23.8b in cash offsetting this, leading to net cash of ₩15.6b.

A Look At Aptamer Sciences' Liabilities

According to the last reported balance sheet, Aptamer Sciences had liabilities of ₩15.2b due within 12 months, and liabilities of ₩1.82b due beyond 12 months. Offsetting this, it had ₩23.8b in cash and ₩312.7m in receivables that were due within 12 months. So it actually has ₩7.04b more liquid assets than total liabilities.

This short term liquidity is a sign that Aptamer Sciences could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Aptamer Sciences has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is Aptamer Sciences'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.

In the last year Aptamer Sciences had a loss before interest and tax, and actually shrunk its revenue by 32%, to ₩243m. That makes us nervous, to say the least.

So How Risky Is Aptamer Sciences?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that Aptamer Sciences had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through ₩12b of cash and made a loss of ₩14b. However, it has net cash of ₩15.6b, so it has a bit of time before it will need more capital. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example Aptamer Sciences has 4 warning signs (and 2 which make us uncomfortable) we think you should know about.

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.