Wavice (KOSDAQ:289930) Has Debt But No Earnings; Should You Worry?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Wavice Inc. (KOSDAQ:289930) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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 examine debt levels, we first consider both cash and debt levels, together.

What Is Wavice's Debt?

The image below, which you can click on for greater detail, shows that Wavice had debt of ₩16.8b at the end of March 2025, a reduction from ₩25.9b over a year. However, it does have ₩19.3b in cash offsetting this, leading to net cash of ₩2.56b.

How Strong Is Wavice's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Wavice had liabilities of ₩23.1b due within 12 months and liabilities of ₩8.63b due beyond that. Offsetting these obligations, it had cash of ₩19.3b as well as receivables valued at ₩540.8m due within 12 months. So its liabilities total ₩11.9b more than the combination of its cash and short-term receivables.

Given Wavice has a market capitalization of ₩123.9b, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Despite its noteworthy liabilities, Wavice boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Wavice will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Check out our latest analysis for Wavice

In the last year Wavice wasn't profitable at an EBIT level, but managed to grow its revenue by 32%, to ₩29b. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is Wavice?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Wavice lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of ₩4.5b and booked a ₩6.7b accounting loss. But the saving grace is the ₩2.56b on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. With very solid revenue growth in the last year, Wavice may be on a path to profitability. Pre-profit companies are often risky, but they can also offer great rewards. 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 2 warning signs with Wavice , and understanding them should be part of your investment process.

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.