Is KAON Group (KOSDAQ:078890) Using Debt In A Risky Way?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. As with many other companies KAON Group Co., Ltd. (KOSDAQ:078890) makes use of debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, 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 KAON Group's Net Debt?

You can click the graphic below for the historical numbers, but it shows that KAON Group had ₩157.2b of debt in September 2025, down from ₩202.4b, one year before. On the flip side, it has ₩35.5b in cash leading to net debt of about ₩121.7b.

How Healthy Is KAON Group's Balance Sheet?

The latest balance sheet data shows that KAON Group had liabilities of ₩234.3b due within a year, and liabilities of ₩29.4b falling due after that. Offsetting this, it had ₩35.5b in cash and ₩110.8b in receivables that were due within 12 months. So its liabilities total ₩117.4b more than the combination of its cash and short-term receivables.

Given this deficit is actually higher than the company's market capitalization of ₩90.7b, we think shareholders really should watch KAON Group's debt levels, like a parent watching their child ride a bike for the first time. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since KAON Group 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.

Check out our latest analysis for KAON Group

In the last year KAON Group wasn't profitable at an EBIT level, but managed to grow its revenue by 6.9%, to ₩518b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months KAON Group produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at ₩7.0b. When we look at that alongside the significant liabilities, we're not particularly confident about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. It's fair to say the loss of ₩21b didn't encourage us either; we'd like to see a profit. And until that time we think this is a 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. We've identified 4 warning signs with KAON Group (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.