Is INTEKPLUS (KOSDAQ:064290) A Risky Investment?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, INTEKPLUS Co., Ltd. (KOSDAQ:064290) does carry debt. But should shareholders be worried about its use of debt?

What Risk Does Debt Bring?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own 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. 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 examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for INTEKPLUS

What Is INTEKPLUS's Debt?

You can click the graphic below for the historical numbers, but it shows that as of December 2023 INTEKPLUS had ₩34.3b of debt, an increase on ₩22.5b, over one year. On the flip side, it has ₩27.0b in cash leading to net debt of about ₩7.32b.

A Look At INTEKPLUS' Liabilities

The latest balance sheet data shows that INTEKPLUS had liabilities of ₩54.3b due within a year, and liabilities of ₩21.7b falling due after that. Offsetting these obligations, it had cash of ₩27.0b as well as receivables valued at ₩21.0b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩28.0b.

Given INTEKPLUS has a market capitalization of ₩399.4b, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine INTEKPLUS'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.

Over 12 months, INTEKPLUS made a loss at the EBIT level, and saw its revenue drop to ₩75b, which is a fall of 37%. That makes us nervous, to say the least.

Caveat Emptor

Not only did INTEKPLUS's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Indeed, it lost ₩11b at the EBIT level. 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. For example, we would not want to see a repeat of last year's loss of ₩11b. So we do think this stock is quite risky. 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. We've identified 1 warning sign with INTEKPLUS , and understanding them should be part of your investment process.

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.