MICRO2NANO (KOSDAQ:424980) Has Debt But No Earnings; Should You Worry?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 can see that MICRO2NANO, Inc. (KOSDAQ:424980) does use debt in its business. But the more important question is: how much risk is that debt creating?

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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 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is MICRO2NANO's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 MICRO2NANO had ₩12.0b of debt, an increase on ₩11.0b, over one year. But on the other hand it also has ₩18.6b in cash, leading to a ₩6.64b net cash position.

How Strong Is MICRO2NANO's Balance Sheet?

We can see from the most recent balance sheet that MICRO2NANO had liabilities of ₩6.08b falling due within a year, and liabilities of ₩17.0b due beyond that. On the other hand, it had cash of ₩18.6b and ₩2.92b worth of receivables due within a year. So its liabilities total ₩1.57b more than the combination of its cash and short-term receivables.

Given MICRO2NANO has a market capitalization of ₩46.2b, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, MICRO2NANO 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 MICRO2NANO'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.

Check out our latest analysis for MICRO2NANO

Over 12 months, MICRO2NANO reported revenue of ₩15b, which is a gain of 92%, 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 MICRO2NANO?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months MICRO2NANO lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of ₩10b and booked a ₩5.1b accounting loss. But at least it has ₩6.64b on the balance sheet to spend on growth, near-term. MICRO2NANO'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. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 3 warning signs with MICRO2NANO (at least 2 which are a bit concerning) , and understanding them should be part of your investment process.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.