Does ISC (KOSDAQ:095340) Have A Healthy Balance Sheet?

Simply Wall St

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.' 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. We can see that ISC Co., Ltd. (KOSDAQ:095340) does use debt in its business. But should shareholders be worried about its use of debt?

What Risk Does Debt Bring?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is ISC's Net Debt?

You can click the graphic below for the historical numbers, but it shows that ISC had ₩20.1b of debt in December 2024, down from ₩43.0b, one year before. However, it does have ₩346.6b in cash offsetting this, leading to net cash of ₩326.5b.

KOSDAQ:A095340 Debt to Equity History April 28th 2025

How Healthy Is ISC's Balance Sheet?

We can see from the most recent balance sheet that ISC had liabilities of ₩52.3b falling due within a year, and liabilities of ₩7.47b due beyond that. On the other hand, it had cash of ₩346.6b and ₩40.2b worth of receivables due within a year. So it actually has ₩327.1b more liquid assets than total liabilities.

This excess liquidity is a great indication that ISC's balance sheet is almost as strong as Fort Knox. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Succinctly put, ISC boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for ISC

Even more impressive was the fact that ISC grew its EBIT by 309% over twelve months. If maintained that growth will make the debt even more manageable in the years ahead. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if ISC can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While ISC has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last three years, ISC recorded free cash flow worth a fulsome 84% of its EBIT, which is stronger than we'd usually expect. That puts it in a very strong position to pay down debt.

Summing Up

While it is always sensible to investigate a company's debt, in this case ISC has ₩326.5b in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of ₩39b, being 84% of its EBIT. The bottom line is that we do not find ISC's debt levels at all concerning. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 1 warning sign for ISC 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.

Valuation is complex, but we're here to simplify it.

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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.