Is HomecastLtd (KOSDAQ:064240) Weighed On By Its Debt Load?

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 note that Homecast Co.,Ltd. (KOSDAQ:064240) 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 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. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is HomecastLtd's Net Debt?

As you can see below, HomecastLtd had ₩8.49b of debt at March 2025, down from ₩11.2b a year prior. But on the other hand it also has ₩46.9b in cash, leading to a ₩38.4b net cash position.

A Look At HomecastLtd's Liabilities

The latest balance sheet data shows that HomecastLtd had liabilities of ₩17.2b due within a year, and liabilities of ₩874.9m falling due after that. Offsetting these obligations, it had cash of ₩46.9b as well as receivables valued at ₩7.77b due within 12 months. So it can boast ₩36.6b more liquid assets than total liabilities.

This excess liquidity is a great indication that HomecastLtd's balance sheet is almost as strong as Fort Knox. Having regard to this fact, we think its balance sheet is as strong as an ox. Simply put, the fact that HomecastLtd has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is HomecastLtd'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.

See our latest analysis for HomecastLtd

Over 12 months, HomecastLtd reported revenue of ₩86b, which is a gain of 21%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

So How Risky Is HomecastLtd?

Although HomecastLtd had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of ₩20b. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. We think its revenue growth of 21% is a good sign. There's no doubt fast top line growth can cure all manner of ills, for a stock. 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. To that end, you should learn about the 3 warning signs we've spotted with HomecastLtd (including 1 which is concerning) .

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.