KD (KOSDAQ:044180) Has Debt But No Earnings; Should You Worry?

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 KD Corporation (KOSDAQ:044180) does use debt in its business. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does KD Carry?

The image below, which you can click on for greater detail, shows that KD had debt of ₩113.4b at the end of March 2025, a reduction from ₩157.4b over a year. On the flip side, it has ₩21.2b in cash leading to net debt of about ₩92.2b.

How Strong Is KD's Balance Sheet?

According to the last reported balance sheet, KD had liabilities of ₩177.8b due within 12 months, and liabilities of ₩84.0b due beyond 12 months. On the other hand, it had cash of ₩21.2b and ₩5.21b worth of receivables due within a year. So its liabilities total ₩235.4b more than the combination of its cash and short-term receivables.

This deficit casts a shadow over the ₩14.5b company, like a colossus towering over mere mortals. So we definitely think shareholders need to watch this one closely. After all, KD would likely require a major re-capitalisation if it had to pay its creditors today. When analysing debt levels, the balance sheet is the obvious place to start. But it is KD'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.

Check out our latest analysis for KD

Over 12 months, KD made a loss at the EBIT level, and saw its revenue drop to ₩128b, which is a fall of 29%. To be frank that doesn't bode well.

Caveat Emptor

Not only did KD's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). To be specific the EBIT loss came in at ₩1.1b. When you combine this with the very significant balance sheet liabilities mentioned above, we are so wary of it that we are basically at a loss for the right words. Sure, the company might have a nice story about how they are going on to a brighter future. But we note that trailing twelve month EBIT is worse than the free cash flow of ₩70b and the profit of ₩315m. So while its ongoing EBIT might disappoint, it has a fair bit going for it! 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. To that end, you should be aware of the 4 warning signs we've spotted with KD .

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.