Is Laserssel (KOSDAQ:412350) Using Too Much Debt?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the 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, Laserssel Co. Ltd. (KOSDAQ:412350) does carry debt. But is this debt a concern to shareholders?

What Risk Does Debt Bring?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for Laserssel

What Is Laserssel's Debt?

As you can see below, at the end of March 2024, Laserssel had ₩14.1b of debt, up from none a year ago. Click the image for more detail. However, its balance sheet shows it holds ₩16.7b in cash, so it actually has ₩2.57b net cash.

A Look At Laserssel's Liabilities

Zooming in on the latest balance sheet data, we can see that Laserssel had liabilities of ₩3.33b due within 12 months and liabilities of ₩13.7b due beyond that. Offsetting this, it had ₩16.7b in cash and ₩1.60b in receivables that were due within 12 months. So it can boast ₩1.24b more liquid assets than total liabilities.

This state of affairs indicates that Laserssel's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the ₩90.8b company is struggling for cash, we still think it's worth monitoring its balance sheet. Succinctly put, Laserssel 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 it is Laserssel's earnings that will influence how the balance sheet holds up in the future. 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.

In the last year Laserssel wasn't profitable at an EBIT level, but managed to grow its revenue by 98%, to ₩6.1b. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is Laserssel?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And in the last year Laserssel had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through ₩17b of cash and made a loss of ₩298m. Given it only has net cash of ₩2.57b, the company may need to raise more capital if it doesn't reach break-even soon. With very solid revenue growth in the last year, Laserssel 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. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 6 warning signs for Laserssel you should be aware of, and 1 of them doesn't sit too well with us.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.