Is IDIS Holdings (KOSDAQ:054800) A Risky Investment?

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 can see that IDIS Holdings Co., Ltd. (KOSDAQ:054800) does use debt in its business. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is IDIS Holdings's Debt?

As you can see below, IDIS Holdings had ₩184.0b of debt, at March 2025, which is about the same as the year before. You can click the chart for greater detail. But it also has ₩376.9b in cash to offset that, meaning it has ₩192.9b net cash.

A Look At IDIS Holdings' Liabilities

The latest balance sheet data shows that IDIS Holdings had liabilities of ₩306.1b due within a year, and liabilities of ₩20.0b falling due after that. On the other hand, it had cash of ₩376.9b and ₩168.5b worth of receivables due within a year. So it can boast ₩219.3b more liquid assets than total liabilities.

This excess liquidity is a great indication that IDIS Holdings' 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. Simply put, the fact that IDIS Holdings has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for IDIS Holdings

In addition to that, we're happy to report that IDIS Holdings has boosted its EBIT by 79%, thus reducing the spectre of future debt repayments. When analysing debt levels, the balance sheet is the obvious place to start. But it is IDIS Holdings'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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While IDIS Holdings 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, IDIS Holdings actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While it is always sensible to investigate a company's debt, in this case IDIS Holdings has ₩192.9b in net cash and a strong balance sheet. The cherry on top was that in converted 106% of that EBIT to free cash flow, bringing in ₩34b. At the end of the day we're not concerned about IDIS Holdings's debt. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that IDIS Holdings is showing 1 warning sign in our investment analysis , you should know about...

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.