Does Laserssel (KOSDAQ:412350) Have A Healthy Balance Sheet?

Simply Wall St · 10/18 23:32

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.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Laserssel Co. Ltd. (KOSDAQ:412350) does use debt in its business. But the real question is whether this debt is making the company risky.

Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

See our latest analysis for Laserssel

How Much Debt Does Laserssel Carry?

The image below, which you can click on for greater detail, shows that at June 2024 Laserssel had debt of ₩8.92b, up from ₩355.7m in one year. But it also has ₩14.5b in cash to offset that, meaning it has ₩5.57b net cash.

debt-equity-history-analysis
KOSDAQ:A412350 Debt to Equity History October 18th 2024

How Strong Is Laserssel's Balance Sheet?

We can see from the most recent balance sheet that Laserssel had liabilities of ₩11.4b falling due within a year, and liabilities of ₩6.85b due beyond that. Offsetting these obligations, it had cash of ₩14.5b as well as receivables valued at ₩1.06b due within 12 months. So it has liabilities totalling ₩2.68b more than its cash and near-term receivables, combined.

Since publicly traded Laserssel shares are worth a total of ₩46.7b, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, Laserssel also has more cash than debt, so we're pretty confident it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is Laserssel's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

In the last year Laserssel wasn't profitable at an EBIT level, but managed to grow its revenue by 19%, to ₩5.1b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is Laserssel?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that Laserssel had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through ₩16b of cash and made a loss of ₩1.5b. With only ₩5.57b on the balance sheet, it would appear that its going to need to raise capital again soon. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 3 warning signs for Laserssel that you should be aware of.

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.