Does OBZEN (KOSDAQ:417860) Have A Healthy Balance Sheet?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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 OBZEN Inc. (KOSDAQ:417860) makes use of debt. But the real question is whether this debt is making the company risky.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

When Is Debt A Problem?

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. If things get really bad, the lenders can take control of the business. 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, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is OBZEN's Debt?

The image below, which you can click on for greater detail, shows that at March 2025 OBZEN had debt of ₩4.54b, up from ₩2.45b in one year. But it also has ₩21.7b in cash to offset that, meaning it has ₩17.1b net cash.

How Strong Is OBZEN's Balance Sheet?

The latest balance sheet data shows that OBZEN had liabilities of ₩12.8b due within a year, and liabilities of ₩7.16b falling due after that. On the other hand, it had cash of ₩21.7b and ₩5.39b worth of receivables due within a year. So it actually has ₩7.17b more liquid assets than total liabilities.

This surplus suggests that OBZEN has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, OBZEN 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 you can't view debt in total isolation; since OBZEN will need earnings to service that debt. 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 OBZEN

In the last year OBZEN wasn't profitable at an EBIT level, but managed to grow its revenue by 21%, to ₩17b. With any luck the company will be able to grow its way to profitability.

So How Risky Is OBZEN?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year OBZEN had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through ₩2.2b of cash and made a loss of ₩1.3b. But the saving grace is the ₩17.1b on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. OBZEN'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. For example OBZEN has 3 warning signs (and 2 which are concerning) we think you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.