Does Xcure (KOSDAQ:070300) Have A Healthy Balance Sheet?

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. Importantly, Xcure Corp. (KOSDAQ:070300) does carry debt. But should shareholders be worried about its use of debt?

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 frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

See our latest analysis for Xcure

What Is Xcure's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of December 2023 Xcure had ₩7.44b of debt, an increase on none, over one year. However, it does have ₩9.97b in cash offsetting this, leading to net cash of ₩2.53b.

How Strong Is Xcure's Balance Sheet?

According to the last reported balance sheet, Xcure had liabilities of ₩23.2b due within 12 months, and liabilities of ₩837.2m due beyond 12 months. Offsetting this, it had ₩9.97b in cash and ₩11.7b in receivables that were due within 12 months. So its liabilities total ₩2.32b more than the combination of its cash and short-term receivables.

Given Xcure has a market capitalization of ₩22.7b, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, Xcure boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Xcure 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.

Over 12 months, Xcure reported revenue of ₩35b, which is a gain of 238%, although it did not report any earnings before interest and tax. When it comes to revenue growth, that's like nailing the game winning 3-pointer!

So How Risky Is Xcure?

Although Xcure had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of ₩2.2b. 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. The good news for Xcure shareholders is that its revenue growth is strong, making it easier to raise capital if need be. But we still think it's somewhat risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 1 warning sign for Xcure you should be aware of.

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.