We Think iWIN PLUSLTD (KOSDAQ:123010) Has A Fair Chunk Of Debt

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 note that iWIN PLUS CO.,LTD. (KOSDAQ:123010) does have debt on its balance sheet. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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. If things get really bad, the lenders can take control of the business. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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.

What Is iWIN PLUSLTD's Net Debt?

The image below, which you can click on for greater detail, shows that iWIN PLUSLTD had debt of ₩15.2b at the end of September 2024, a reduction from ₩21.9b over a year. On the flip side, it has ₩3.05b in cash leading to net debt of about ₩12.1b.

A Look At iWIN PLUSLTD's Liabilities

We can see from the most recent balance sheet that iWIN PLUSLTD had liabilities of ₩21.8b falling due within a year, and liabilities of ₩2.08b due beyond that. Offsetting these obligations, it had cash of ₩3.05b as well as receivables valued at ₩15.2b due within 12 months. So it has liabilities totalling ₩5.64b more than its cash and near-term receivables, combined.

Of course, iWIN PLUSLTD has a market capitalization of ₩42.5b, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since iWIN PLUSLTD 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.

Check out our latest analysis for iWIN PLUSLTD

In the last year iWIN PLUSLTD wasn't profitable at an EBIT level, but managed to grow its revenue by 50%, to ₩39b. Shareholders probably have their fingers crossed that it can grow its way to profits.

Caveat Emptor

While we can certainly appreciate iWIN PLUSLTD's revenue growth, its earnings before interest and tax (EBIT) loss is not ideal. Its EBIT loss was a whopping ₩7.0b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled ₩7.4b in negative free cash flow over the last twelve months. So in short it's a really risky stock. 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. We've identified 3 warning signs with iWIN PLUSLTD (at least 2 which are significant) , 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.