LAON PEOPLE (KOSDAQ:300120) Is Making Moderate Use Of Debt

Simply Wall St · 06/10 21:31

Warren Buffett famously said, '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. Importantly, LAON PEOPLE Inc (KOSDAQ:300120) does carry debt. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does LAON PEOPLE Carry?

The image below, which you can click on for greater detail, shows that at March 2025 LAON PEOPLE had debt of ₩48.0b, up from ₩40.1b in one year. However, it does have ₩22.1b in cash offsetting this, leading to net debt of about ₩26.0b.

debt-equity-history-analysis
KOSDAQ:A300120 Debt to Equity History June 10th 2025

How Strong Is LAON PEOPLE's Balance Sheet?

We can see from the most recent balance sheet that LAON PEOPLE had liabilities of ₩64.1b falling due within a year, and liabilities of ₩24.7b due beyond that. Offsetting this, it had ₩22.1b in cash and ₩19.6b in receivables that were due within 12 months. So its liabilities total ₩47.2b more than the combination of its cash and short-term receivables.

While this might seem like a lot, it is not so bad since LAON PEOPLE has a market capitalization of ₩99.1b, and so it could probably strengthen its balance sheet by raising capital if it needed to. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since LAON PEOPLE will need earnings to service that debt. 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.

Check out our latest analysis for LAON PEOPLE

In the last year LAON PEOPLE wasn't profitable at an EBIT level, but managed to grow its revenue by 443%, to ₩231b. That's virtually the hole-in-one of revenue growth!

Caveat Emptor

Even though LAON PEOPLE managed to grow its top line quite deftly, the cold hard truth is that it is losing money on the EBIT line. Indeed, it lost a very considerable ₩20b 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 ₩15b in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very 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. For instance, we've identified 3 warning signs for LAON PEOPLE (2 shouldn't be ignored) you should be aware of.

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.