ESTsoft (KOSDAQ:047560) Has Debt But No Earnings; Should You Worry?

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. As with many other companies ESTsoft Corp. (KOSDAQ:047560) makes use of debt. But the real question is whether this debt is making the company risky.

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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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is ESTsoft's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 ESTsoft had ₩32.4b of debt, an increase on ₩29.9b, over one year. But on the other hand it also has ₩83.9b in cash, leading to a ₩51.5b net cash position.

A Look At ESTsoft's Liabilities

Zooming in on the latest balance sheet data, we can see that ESTsoft had liabilities of ₩75.0b due within 12 months and liabilities of ₩39.6b due beyond that. On the other hand, it had cash of ₩83.9b and ₩13.1b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩17.6b.

Given ESTsoft has a market capitalization of ₩230.5b, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, ESTsoft also has more cash than debt, so we're pretty confident it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine ESTsoft's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

See our latest analysis for ESTsoft

In the last year ESTsoft wasn't profitable at an EBIT level, but managed to grow its revenue by 2.8%, to ₩105b. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is ESTsoft?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year ESTsoft had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of ₩20b and booked a ₩8.5b accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of ₩51.5b. That kitty means the company can keep spending for growth for at least two years, at current rates. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how ESTsoft's profit, revenue, and operating cashflow have changed over the last few years.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.