We Think Kostecsys (KOSDAQ:355150) Has A Fair Chunk Of Debt

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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. As with many other companies Kostecsys. Co., Ltd. (KOSDAQ:355150) makes use of debt. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Kostecsys's Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Kostecsys had ₩13.5b of debt, an increase on ₩11.7b, over one year. On the flip side, it has ₩546.5m in cash leading to net debt of about ₩13.0b.

A Look At Kostecsys' Liabilities

The latest balance sheet data shows that Kostecsys had liabilities of ₩7.09b due within a year, and liabilities of ₩9.19b falling due after that. On the other hand, it had cash of ₩546.5m and ₩2.22b worth of receivables due within a year. So its liabilities total ₩13.5b more than the combination of its cash and short-term receivables.

Given Kostecsys has a market capitalization of ₩91.2b, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Kostecsys can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Check out our latest analysis for Kostecsys

Over 12 months, Kostecsys made a loss at the EBIT level, and saw its revenue drop to ₩13b, which is a fall of 8.2%. That's not what we would hope to see.

Caveat Emptor

Importantly, Kostecsys had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost ₩2.9b at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through ₩1.5b of cash over the last year. So suffice it to say we do consider the stock to be risky. The balance sheet is clearly the area to focus on when you are analysing debt. 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 Kostecsys (including 1 which doesn't sit too well with us) .

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.