Hyundai Autoever (KRX:307950) Seems To Use Debt Rather Sparingly

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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Hyundai Autoever Corporation (KRX:307950) does carry debt. But is this debt a concern to shareholders?

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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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Hyundai Autoever's Debt?

The chart below, which you can click on for greater detail, shows that Hyundai Autoever had ₩50.0b in debt in March 2025; about the same as the year before. However, its balance sheet shows it holds ₩727.4b in cash, so it actually has ₩677.4b net cash.

How Healthy Is Hyundai Autoever's Balance Sheet?

The latest balance sheet data shows that Hyundai Autoever had liabilities of ₩1.07t due within a year, and liabilities of ₩372.5b falling due after that. Offsetting these obligations, it had cash of ₩727.4b as well as receivables valued at ₩972.9b due within 12 months. So it can boast ₩256.4b more liquid assets than total liabilities.

This surplus suggests that Hyundai Autoever has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Hyundai Autoever boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Hyundai Autoever

Another good sign is that Hyundai Autoever has been able to increase its EBIT by 21% in twelve months, making it easier to pay down debt. 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 Hyundai Autoever 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Hyundai Autoever 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 most recent three years, Hyundai Autoever recorded free cash flow worth 59% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

While it is always sensible to investigate a company's debt, in this case Hyundai Autoever has ₩677.4b in net cash and a decent-looking balance sheet. And we liked the look of last year's 21% year-on-year EBIT growth. So we don't think Hyundai Autoever's use of debt is risky. Over time, share prices tend to follow earnings per share, so if you're interested in Hyundai Autoever, you may well want to click here to check an interactive graph of its earnings per share history.

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.