Is LG CNS (KRX:064400) A Risky Investment?

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.' 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 LG CNS Co., Ltd. (KRX:064400) does use debt in its business. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is LG CNS's Debt?

The image below, which you can click on for greater detail, shows that LG CNS had debt of ₩390.7b at the end of September 2025, a reduction from ₩553.0b over a year. However, its balance sheet shows it holds ₩1.49t in cash, so it actually has ₩1.10t net cash.

How Healthy Is LG CNS' Balance Sheet?

We can see from the most recent balance sheet that LG CNS had liabilities of ₩1.55t falling due within a year, and liabilities of ₩395.3b due beyond that. Offsetting this, it had ₩1.49t in cash and ₩1.14t in receivables that were due within 12 months. So it actually has ₩688.1b more liquid assets than total liabilities.

This short term liquidity is a sign that LG CNS could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that LG CNS has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for LG CNS

The good news is that LG CNS has increased its EBIT by 6.2% over twelve months, which should ease any concerns about debt repayment. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if LG CNS can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While LG CNS has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last three years, LG CNS recorded free cash flow worth a fulsome 81% of its EBIT, which is stronger than we'd usually expect. That positions it well to pay down debt if desirable to do so.

Summing Up

While it is always sensible to investigate a company's debt, in this case LG CNS has ₩1.10t in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of ₩413b, being 81% of its EBIT. So we don't think LG CNS's use of debt is risky. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of LG CNS's earnings per share history for free.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.