Does SIMMTECH (KOSDAQ:222800) Have A Healthy Balance Sheet?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, SIMMTECH Co., Ltd. (KOSDAQ:222800) does carry debt. But the real question is whether this debt is making the company risky.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is SIMMTECH's Debt?

As you can see below, at the end of June 2025, SIMMTECH had ₩590.7b of debt, up from ₩390.9b a year ago. Click the image for more detail. However, it does have ₩111.8b in cash offsetting this, leading to net debt of about ₩478.9b.

How Strong Is SIMMTECH's Balance Sheet?

We can see from the most recent balance sheet that SIMMTECH had liabilities of ₩847.3b falling due within a year, and liabilities of ₩215.6b due beyond that. On the other hand, it had cash of ₩111.8b and ₩306.0b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩645.1b.

While this might seem like a lot, it is not so bad since SIMMTECH has a market capitalization of ₩1.71t, and so it could probably strengthen its balance sheet by raising capital if it needed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if SIMMTECH can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

See our latest analysis for SIMMTECH

In the last year SIMMTECH wasn't profitable at an EBIT level, but managed to grow its revenue by 6.8%, to ₩1.3t. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Over the last twelve months SIMMTECH produced an earnings before interest and tax (EBIT) loss. Indeed, it lost ₩48b 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. However, it doesn't help that it burned through ₩273b of cash over the last year. So in short it's a really risky stock. 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. For instance, we've identified 2 warning signs for SIMMTECH that you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.