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.' 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. We can see that LB Semicon Inc. (KOSDAQ:061970) does use debt in its business. But should shareholders be worried about its use of debt?
What Risk Does Debt Bring?
Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.
How Much Debt Does LB Semicon Carry?
The chart below, which you can click on for greater detail, shows that LB Semicon had ₩359.3b in debt in June 2025; about the same as the year before. However, it does have ₩12.8b in cash offsetting this, leading to net debt of about ₩346.5b.
How Healthy Is LB Semicon's Balance Sheet?
We can see from the most recent balance sheet that LB Semicon had liabilities of ₩319.6b falling due within a year, and liabilities of ₩117.2b due beyond that. On the other hand, it had cash of ₩12.8b and ₩66.0b worth of receivables due within a year. So its liabilities total ₩357.9b more than the combination of its cash and short-term receivables.
Given this deficit is actually higher than the company's market capitalization of ₩291.8b, we think shareholders really should watch LB Semicon's debt levels, like a parent watching their child ride a bike for the first time. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since LB Semicon will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.
View our latest analysis for LB Semicon
Over 12 months, LB Semicon reported revenue of ₩457b, which is a gain of 2.8%, 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.
Caveat Emptor
Importantly, LB Semicon had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost ₩20b at the EBIT level. Considering that alongside the liabilities mentioned above make us nervous about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it had negative free cash flow of ₩52b over the last twelve months. So suffice it to say we consider the stock to be risky. 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 learn about the 3 warning signs we've spotted with LB Semicon (including 2 which are potentially serious) .
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.