Is HiDeep (KOSDAQ:365590) Using Too Much Debt?

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.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies HiDeep Inc. (KOSDAQ:365590) makes use of debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

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. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is HiDeep's Net Debt?

You can click the graphic below for the historical numbers, but it shows that HiDeep had ₩7.48b of debt in June 2025, down from ₩9.35b, one year before. However, its balance sheet shows it holds ₩10.9b in cash, so it actually has ₩3.40b net cash.

A Look At HiDeep's Liabilities

We can see from the most recent balance sheet that HiDeep had liabilities of ₩1.50b falling due within a year, and liabilities of ₩8.71b due beyond that. Offsetting these obligations, it had cash of ₩10.9b as well as receivables valued at ₩719.1m due within 12 months. So it can boast ₩1.39b more liquid assets than total liabilities.

This surplus suggests that HiDeep has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that HiDeep has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is HiDeep's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for HiDeep

In the last year HiDeep had a loss before interest and tax, and actually shrunk its revenue by 40%, to ₩3.6b. To be frank that doesn't bode well.

So How Risky Is HiDeep?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months HiDeep lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of ₩7.5b and booked a ₩9.5b accounting loss. However, it has net cash of ₩3.40b, so it has a bit of time before it will need more capital. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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. For instance, we've identified 4 warning signs for HiDeep (1 is concerning) you should be aware of.

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.