Would DASAN Networks (KOSDAQ:039560) Be Better Off With Less Debt?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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. We note that DASAN Networks, Inc. (KOSDAQ:039560) does have debt on its balance sheet. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, 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 DASAN Networks's Debt?

As you can see below, at the end of March 2025, DASAN Networks had ₩141.8b of debt, up from ₩70.3b a year ago. Click the image for more detail. However, it does have ₩76.3b in cash offsetting this, leading to net debt of about ₩65.5b.

How Strong Is DASAN Networks' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that DASAN Networks had liabilities of ₩264.9b due within 12 months and liabilities of ₩26.3b due beyond that. On the other hand, it had cash of ₩76.3b and ₩175.7b worth of receivables due within a year. So it has liabilities totalling ₩39.3b more than its cash and near-term receivables, combined.

DASAN Networks has a market capitalization of ₩121.6b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. When analysing debt levels, the balance sheet is the obvious place to start. But it is DASAN Networks'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.

Check out our latest analysis for DASAN Networks

In the last year DASAN Networks wasn't profitable at an EBIT level, but managed to grow its revenue by 303%, to ₩421b. When it comes to revenue growth, that's like nailing the game winning 3-pointer!

Caveat Emptor

Despite the top line growth, DASAN Networks still had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost ₩544m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through ₩22b of cash over the last year. So in short it's a really risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 2 warning signs for DASAN Networks (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

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.