Is Woori Technology (KOSDAQ:032820) A Risky Investment?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Woori Technology, Inc. (KOSDAQ:032820) makes use of debt. But is this debt a concern to shareholders?

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

What Is Woori Technology's Debt?

The image below, which you can click on for greater detail, shows that at March 2025 Woori Technology had debt of ₩112.4b, up from ₩57.5b in one year. However, it also had ₩3.52b in cash, and so its net debt is ₩108.8b.

A Look At Woori Technology's Liabilities

Zooming in on the latest balance sheet data, we can see that Woori Technology had liabilities of ₩81.0b due within 12 months and liabilities of ₩76.5b due beyond that. Offsetting these obligations, it had cash of ₩3.52b as well as receivables valued at ₩22.3b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩131.7b.

While this might seem like a lot, it is not so bad since Woori Technology has a market capitalization of ₩636.5b, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Woori Technology 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.

View our latest analysis for Woori Technology

Over 12 months, Woori Technology reported revenue of ₩74b, which is a gain of 8.9%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months Woori Technology produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at ₩3.2b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through ₩60b of cash over the last year. So suffice it to say we consider the stock very risky. 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. Case in point: We've spotted 1 warning sign for Woori Technology you should be aware of.

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.

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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.