Is ItcenpnsLtd (KOSDAQ:232830) Weighed On By Its Debt Load?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. Importantly, Itcenpns Co.,Ltd. (KOSDAQ:232830) does carry debt. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does ItcenpnsLtd Carry?

As you can see below, at the end of March 2025, ItcenpnsLtd had ₩46.7b of debt, up from ₩3.65b a year ago. Click the image for more detail. On the flip side, it has ₩7.49b in cash leading to net debt of about ₩39.2b.

How Strong Is ItcenpnsLtd's Balance Sheet?

According to the last reported balance sheet, ItcenpnsLtd had liabilities of ₩91.4b due within 12 months, and liabilities of ₩15.0b due beyond 12 months. Offsetting these obligations, it had cash of ₩7.49b as well as receivables valued at ₩57.2b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩41.7b.

When you consider that this deficiency exceeds the company's ₩31.1b market capitalization, you might well be inclined to review the balance sheet intently. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. There's no doubt that we learn most about debt from the balance sheet. But it is ItcenpnsLtd'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.

Check out our latest analysis for ItcenpnsLtd

In the last year ItcenpnsLtd wasn't profitable at an EBIT level, but managed to grow its revenue by 310%, to ₩156b. That's virtually the hole-in-one of revenue growth!

Caveat Emptor

Despite the top line growth, ItcenpnsLtd still had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at ₩1.4b. Considering that alongside the liabilities mentioned above make us nervous about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it had negative free cash flow of ₩5.6b over the last twelve months. That means it's on the risky side of things. 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 example - ItcenpnsLtd has 3 warning signs we think you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.