KUKJEON PHARMACEUTICAL (KOSDAQ:307750) Is Carrying A Fair Bit Of Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies KUKJEON PHARMACEUTICAL Co., Ltd (KOSDAQ:307750) makes use of debt. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

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. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does KUKJEON PHARMACEUTICAL Carry?

The image below, which you can click on for greater detail, shows that KUKJEON PHARMACEUTICAL had debt of ₩57.1b at the end of March 2025, a reduction from ₩77.4b over a year. On the flip side, it has ₩38.6b in cash leading to net debt of about ₩18.5b.

How Strong Is KUKJEON PHARMACEUTICAL's Balance Sheet?

According to the last reported balance sheet, KUKJEON PHARMACEUTICAL had liabilities of ₩82.3b due within 12 months, and liabilities of ₩25.6b due beyond 12 months. On the other hand, it had cash of ₩38.6b and ₩36.1b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩33.2b.

Of course, KUKJEON PHARMACEUTICAL has a market capitalization of ₩233.8b, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. The balance sheet is clearly the area to focus on when you are analysing debt. But it is KUKJEON PHARMACEUTICAL's earnings that will influence how the balance sheet holds up in the future. 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.

See our latest analysis for KUKJEON PHARMACEUTICAL

In the last year KUKJEON PHARMACEUTICAL wasn't profitable at an EBIT level, but managed to grow its revenue by 4.6%, to ₩135b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Importantly, KUKJEON PHARMACEUTICAL had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at ₩1.1b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. On the bright side, we note that trailing twelve month EBIT is worse than the free cash flow of ₩2.4b and the profit of ₩1.4b. So one might argue that there's still a chance it can get things on the right track. 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, we've discovered 3 warning signs for KUKJEON PHARMACEUTICAL (2 are significant!) that you should be aware of before investing here.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.