Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, EM-Tech.CO., LTD. (KOSDAQ:091120) does carry debt. But the real question is whether this debt is making the company risky.
When Is Debt Dangerous?
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. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.
What Is EM-Tech.CO's Debt?
The image below, which you can click on for greater detail, shows that EM-Tech.CO had debt of ₩111.4b at the end of March 2025, a reduction from ₩123.5b over a year. However, because it has a cash reserve of ₩61.8b, its net debt is less, at about ₩49.6b.
A Look At EM-Tech.CO's Liabilities
According to the last reported balance sheet, EM-Tech.CO had liabilities of ₩110.0b due within 12 months, and liabilities of ₩24.9b due beyond 12 months. On the other hand, it had cash of ₩61.8b and ₩18.7b worth of receivables due within a year. So it has liabilities totalling ₩54.4b more than its cash and near-term receivables, combined.
This deficit isn't so bad because EM-Tech.CO is worth ₩174.4b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is EM-Tech.CO's earnings that will influence how the balance sheet holds up in the future. 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 EM-Tech.CO
Over 12 months, EM-Tech.CO made a loss at the EBIT level, and saw its revenue drop to ₩159b, which is a fall of 33%. To be frank that doesn't bode well.
Caveat Emptor
Not only did EM-Tech.CO's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Its EBIT loss was a whopping ₩35b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through ₩17b of cash over the last year. So suffice it to say we consider the stock very 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. Be aware that EM-Tech.CO 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.
Valuation is complex, but we're here to simplify it.
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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.