Is Playgram (KRX:009810) Weighed On By Its Debt Load?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that Playgram Co., Ltd. (KRX:009810) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

View our latest analysis for Playgram

What Is Playgram's Net Debt?

As you can see below, Playgram had ₩28.7b of debt at September 2024, down from ₩33.0b a year prior. However, it does have ₩64.6b in cash offsetting this, leading to net cash of ₩35.9b.

A Look At Playgram's Liabilities

Zooming in on the latest balance sheet data, we can see that Playgram had liabilities of ₩77.1b due within 12 months and liabilities of ₩7.97b due beyond that. Offsetting these obligations, it had cash of ₩64.6b as well as receivables valued at ₩44.4b due within 12 months. So it actually has ₩23.9b more liquid assets than total liabilities.

This excess liquidity is a great indication that Playgram's balance sheet is almost as strong as Fort Knox. On this view, lenders should feel as safe as the beloved of a black-belt karate master. Succinctly put, Playgram 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 Playgram'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.

Over 12 months, Playgram reported revenue of ₩262b, which is a gain of 25%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

So How Risky Is Playgram?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Playgram lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of ₩8.9b and booked a ₩37b accounting loss. But the saving grace is the ₩35.9b on the balance sheet. That means it could keep spending at its current rate for more than two years. Playgram's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. 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. However, not all investment risk resides within the balance sheet - far from it. Be aware that Playgram is showing 3 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

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.