Is Samsung Electronics (KRX:005930) A Risky Investment?

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, Samsung Electronics Co., Ltd. (KRX:005930) does carry debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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, 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.

How Much Debt Does Samsung Electronics Carry?

The image below, which you can click on for greater detail, shows that at June 2025 Samsung Electronics had debt of ₩14t, up from ₩12t in one year. However, its balance sheet shows it holds ₩101t in cash, so it actually has ₩87t net cash.

A Look At Samsung Electronics' Liabilities

Zooming in on the latest balance sheet data, we can see that Samsung Electronics had liabilities of ₩20t due within 12 months and liabilities of ₩85t due beyond that. Offsetting this, it had ₩101t in cash and ₩44t in receivables that were due within 12 months. So it can boast ₩39t more liquid assets than total liabilities.

This surplus suggests that Samsung Electronics has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Samsung Electronics boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Samsung Electronics

Also positive, Samsung Electronics grew its EBIT by 21% in the last year, and that should make it easier to pay down debt, going forward. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Samsung Electronics can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Samsung Electronics may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Looking at the most recent three years, Samsung Electronics recorded free cash flow of 25% of its EBIT, which is weaker than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

While it is always sensible to investigate a company's debt, in this case Samsung Electronics has ₩87t in net cash and a decent-looking balance sheet. And it impressed us with its EBIT growth of 21% over the last year. So is Samsung Electronics's debt a risk? It doesn't seem so to us. Over time, share prices tend to follow earnings per share, so if you're interested in Samsung Electronics, you may well want to click here to check an interactive graph of its earnings per share history.

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.