Health Check: How Prudently Does S.Biomedics (KOSDAQ:304360) Use Debt?

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. We note that S.Biomedics Co., Ltd. (KOSDAQ:304360) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is S.Biomedics's Net Debt?

The image below, which you can click on for greater detail, shows that at December 2024 S.Biomedics had debt of ₩17.7b, up from ₩10.4b in one year. But it also has ₩23.9b in cash to offset that, meaning it has ₩6.26b net cash.

How Healthy Is S.Biomedics' Balance Sheet?

We can see from the most recent balance sheet that S.Biomedics had liabilities of ₩11.8b falling due within a year, and liabilities of ₩14.5b due beyond that. Offsetting this, it had ₩23.9b in cash and ₩2.05b in receivables that were due within 12 months. So its total liabilities are just about perfectly matched by its shorter-term, liquid assets.

Having regard to S.Biomedics' size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the ₩275.4b company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, S.Biomedics 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 S.Biomedics 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 S.Biomedics

Over 12 months, S.Biomedics reported revenue of ₩14b, which is a gain of 4.8%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is S.Biomedics?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months S.Biomedics lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through ₩5.2b of cash and made a loss of ₩6.7b. But the saving grace is the ₩6.26b on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. 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. To that end, you should be aware of the 1 warning sign we've spotted with S.Biomedics .

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.