Shindo Eng. Lab (KOSDAQ:290520) Has Debt But No Earnings; Should You Worry?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. As with many other companies Shindo Eng. Lab., Ltd. (KOSDAQ:290520) makes use of debt. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Shindo Eng. Lab Carry?

As you can see below, at the end of June 2025, Shindo Eng. Lab had ₩3.00b of debt, up from none a year ago. Click the image for more detail. However, its balance sheet shows it holds ₩38.6b in cash, so it actually has ₩35.6b net cash.

A Look At Shindo Eng. Lab's Liabilities

The latest balance sheet data shows that Shindo Eng. Lab had liabilities of ₩19.3b due within a year, and liabilities of ₩742.9m falling due after that. Offsetting these obligations, it had cash of ₩38.6b as well as receivables valued at ₩786.6m due within 12 months. So it can boast ₩19.4b more liquid assets than total liabilities.

This luscious liquidity implies that Shindo Eng. Lab's balance sheet is sturdy like a giant sequoia tree. Having regard to this fact, we think its balance sheet is as strong as an ox. Succinctly put, Shindo Eng. Lab boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Shindo Eng. Lab 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 Shindo Eng. Lab

In the last year Shindo Eng. Lab had a loss before interest and tax, and actually shrunk its revenue by 57%, to ₩6.9b. To be frank that doesn't bode well.

So How Risky Is Shindo Eng. Lab?

While Shindo Eng. Lab lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow ₩994m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. The next few years will be important as the business matures. 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. Be aware that Shindo Eng. Lab is showing 3 warning signs in our investment analysis , and 1 of those can't be ignored...

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.