PAKERS.Co.Ltd (KOSDAQ:065690) Has Debt But No Earnings; Should You Worry?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies PAKERS.Co.,Ltd. (KOSDAQ:065690) makes use of debt. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does PAKERS.Co.Ltd Carry?

The image below, which you can click on for greater detail, shows that PAKERS.Co.Ltd had debt of ₩35.0b at the end of December 2024, a reduction from ₩50.0b over a year. However, because it has a cash reserve of ₩16.4b, its net debt is less, at about ₩18.7b.

How Strong Is PAKERS.Co.Ltd's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that PAKERS.Co.Ltd had liabilities of ₩62.5b due within 12 months and liabilities of ₩6.12b due beyond that. On the other hand, it had cash of ₩16.4b and ₩20.7b worth of receivables due within a year. So its liabilities total ₩31.5b more than the combination of its cash and short-term receivables.

This deficit casts a shadow over the ₩13.3b company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. After all, PAKERS.Co.Ltd would likely require a major re-capitalisation if it had to pay its creditors today. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since PAKERS.Co.Ltd will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend .

See our latest analysis for PAKERS.Co.Ltd

Over 12 months, PAKERS.Co.Ltd saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that hardly impresses, its not too bad either.

Caveat Emptor

Over the last twelve months PAKERS.Co.Ltd produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable ₩1.4b at the EBIT level. Considering that alongside the liabilities mentioned above make us nervous about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. For example, we would not want to see a repeat of last year's loss of ₩2.6b. In the meantime, we consider the stock to be risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. To that end, you should be aware of the 2 warning signs we've spotted with PAKERS.Co.Ltd .

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.