Is Openedges Technology (KOSDAQ:394280) Weighed On By Its Debt Load?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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, Openedges Technology, Inc. (KOSDAQ:394280) does carry debt. But the more important question is: how much risk is that debt creating?

Why Does Debt Bring Risk?

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. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

Check out our latest analysis for Openedges Technology

What Is Openedges Technology's Debt?

The image below, which you can click on for greater detail, shows that at December 2023 Openedges Technology had debt of ₩15.0b, up from ₩10.0b in one year. But it also has ₩15.7b in cash to offset that, meaning it has ₩740.5m net cash.

How Strong Is Openedges Technology's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Openedges Technology had liabilities of ₩19.7b due within 12 months and liabilities of ₩4.37b due beyond that. Offsetting this, it had ₩15.7b in cash and ₩7.22b in receivables that were due within 12 months. So its liabilities total ₩1.16b more than the combination of its cash and short-term receivables.

This state of affairs indicates that Openedges Technology's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the ₩645.2b company is short on cash, but still worth keeping an eye on the balance sheet. While it does have liabilities worth noting, Openedges Technology also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Openedges Technology 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.

Over 12 months, Openedges Technology reported revenue of ₩20b, which is a gain of 96%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is Openedges Technology?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that Openedges Technology had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of ₩22b and booked a ₩15b accounting loss. With only ₩740.5m on the balance sheet, it would appear that its going to need to raise capital again soon. Openedges Technology's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 3 warning signs for Openedges Technology (1 can't be ignored) 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.