Is Kolon TissueGene (KOSDAQ:950160) Using Too Much Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Kolon TissueGene, Inc. (KOSDAQ:950160) does use debt in its business. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. 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 think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Kolon TissueGene Carry?

As you can see below, at the end of March 2025, Kolon TissueGene had ₩29.5b of debt, up from none a year ago. Click the image for more detail. But on the other hand it also has ₩53.2b in cash, leading to a ₩23.7b net cash position.

How Healthy Is Kolon TissueGene's Balance Sheet?

According to the last reported balance sheet, Kolon TissueGene had liabilities of ₩120.2b due within 12 months, and liabilities of ₩5.14b due beyond 12 months. On the other hand, it had cash of ₩53.2b and ₩301.8m worth of receivables due within a year. So it has liabilities totalling ₩71.9b more than its cash and near-term receivables, combined.

Since publicly traded Kolon TissueGene shares are worth a total of ₩3.34t, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Kolon TissueGene 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 it is future earnings, more than anything, that will determine Kolon TissueGene's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

View our latest analysis for Kolon TissueGene

In the last year Kolon TissueGene wasn't profitable at an EBIT level, but managed to grow its revenue by 17%, to ₩5.1b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is Kolon TissueGene?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year Kolon TissueGene had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through ₩130b of cash and made a loss of ₩36b. With only ₩23.7b on the balance sheet, it would appear that its going to need to raise capital again soon. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see 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, we've discovered 4 warning signs for Kolon TissueGene that you should be aware of before investing here.

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.