Hyundai Glovis (KRX:086280) Seems To Use Debt Rather Sparingly

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 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, Hyundai Glovis Co., Ltd. (KRX:086280) does carry debt. But should shareholders be worried about its use of debt?

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Hyundai Glovis Carry?

The image below, which you can click on for greater detail, shows that at March 2025 Hyundai Glovis had debt of ₩2.08t, up from ₩1.99t in one year. But it also has ₩5.03t in cash to offset that, meaning it has ₩2.95t net cash.

How Strong Is Hyundai Glovis' Balance Sheet?

The latest balance sheet data shows that Hyundai Glovis had liabilities of ₩5.59t due within a year, and liabilities of ₩3.07t falling due after that. Offsetting these obligations, it had cash of ₩5.03t as well as receivables valued at ₩3.08t due within 12 months. So it has liabilities totalling ₩547.7b more than its cash and near-term receivables, combined.

Given Hyundai Glovis has a market capitalization of ₩9.12t, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. While it does have liabilities worth noting, Hyundai Glovis also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Hyundai Glovis

Also positive, Hyundai Glovis grew its EBIT by 22% in the last year, and that should make it easier to pay down debt, going forward. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Hyundai Glovis 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Hyundai Glovis 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. Over the last three years, Hyundai Glovis actually produced more free cash flow than EBIT. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

We could understand if investors are concerned about Hyundai Glovis's liabilities, but we can be reassured by the fact it has has net cash of ₩2.95t. The cherry on top was that in converted 107% of that EBIT to free cash flow, bringing in ₩1.7t. So is Hyundai Glovis's debt a risk? It doesn't seem so to us. Given Hyundai Glovis has a strong balance sheet is profitable and pays a dividend, it would be good to know how fast its dividends are growing, if at all. You can find out instantly by clicking this link.

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.