Anapass (KOSDAQ:123860) Could Easily Take On More Debt

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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. We can see that Anapass, Inc. (KOSDAQ:123860) does use debt in its business. But is this debt a concern to shareholders?

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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. If things get really bad, the lenders can take control of the business. 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.

What Is Anapass's Debt?

As you can see below, at the end of June 2025, Anapass had ₩7.50b of debt, up from ₩5.10b a year ago. Click the image for more detail. But it also has ₩75.5b in cash to offset that, meaning it has ₩68.0b net cash.

How Healthy Is Anapass' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Anapass had liabilities of ₩45.7b due within 12 months and liabilities of ₩163.2m due beyond that. On the other hand, it had cash of ₩75.5b and ₩6.81b worth of receivables due within a year. So it actually has ₩36.5b more liquid assets than total liabilities.

This surplus suggests that Anapass is using debt in a way that is appears to be both safe and conservative. Due to its strong net asset position, it is not likely to face issues with its lenders. Simply put, the fact that Anapass has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for Anapass

Better yet, Anapass grew its EBIT by 349% last year, which is an impressive improvement. If maintained that growth will make the debt even more manageable in the years ahead. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Anapass 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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Anapass 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. Happily for any shareholders, Anapass actually produced more free cash flow than EBIT over the last two years. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While it is always sensible to investigate a company's debt, in this case Anapass has ₩68.0b in net cash and a decent-looking balance sheet. The cherry on top was that in converted 206% of that EBIT to free cash flow, bringing in ₩34b. When it comes to Anapass's debt, we sufficiently relaxed that our mind turns to the jacuzzi. Over time, share prices tend to follow earnings per share, so if you're interested in Anapass, you may well want to click here to check an interactive graph of its earnings per share history.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.