Here's Why PEMTRON (KOSDAQ:168360) Can Afford Some Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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. As with many other companies PEMTRON Corporation (KOSDAQ:168360) makes use of debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does PEMTRON Carry?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 PEMTRON had ₩34.3b of debt, an increase on ₩18.1b, over one year. However, it does have ₩18.1b in cash offsetting this, leading to net debt of about ₩16.2b.

How Strong Is PEMTRON's Balance Sheet?

The latest balance sheet data shows that PEMTRON had liabilities of ₩74.6b due within a year, and liabilities of ₩8.05b falling due after that. Offsetting these obligations, it had cash of ₩18.1b as well as receivables valued at ₩12.7b due within 12 months. So its liabilities total ₩51.8b more than the combination of its cash and short-term receivables.

Of course, PEMTRON has a market capitalization of ₩420.6b, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. The balance sheet is clearly the area to focus on when you are analysing debt. But it is PEMTRON'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.

View our latest analysis for PEMTRON

Over 12 months, PEMTRON made a loss at the EBIT level, and saw its revenue drop to ₩59b, which is a fall of 5.4%. That's not what we would hope to see.

Caveat Emptor

Importantly, PEMTRON had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost ₩2.5b at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled ₩11b in negative free cash flow over the last twelve months. So suffice it to say we do 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 learn about the 3 warning signs we've spotted with PEMTRON (including 2 which are potentially serious) .

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.