WEBULL

Sam Chun Dang Pharm (KOSDAQ:000250) Takes On Some Risk With Its Use Of Debt

Simply Wall St · 12/31/2025 01:36

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.' 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. We can see that Sam Chun Dang Pharm. Co., Ltd (KOSDAQ:000250) does use debt in its business. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

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. If things get really bad, the lenders can take control of the business. 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. 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. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Sam Chun Dang Pharm Carry?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 Sam Chun Dang Pharm had ₩66.8b of debt, an increase on ₩55.5b, over one year. But on the other hand it also has ₩117.1b in cash, leading to a ₩50.3b net cash position.

debt-equity-history-analysis
KOSDAQ:A000250 Debt to Equity History December 31st 2025

How Healthy Is Sam Chun Dang Pharm's Balance Sheet?

We can see from the most recent balance sheet that Sam Chun Dang Pharm had liabilities of ₩89.2b falling due within a year, and liabilities of ₩85.7b due beyond that. Offsetting these obligations, it had cash of ₩117.1b as well as receivables valued at ₩47.6b due within 12 months. So its liabilities total ₩10.3b more than the combination of its cash and short-term receivables.

This state of affairs indicates that Sam Chun Dang Pharm's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the ₩5.41t company is short on cash, but still worth keeping an eye on the balance sheet. Despite its noteworthy liabilities, Sam Chun Dang Pharm boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Sam Chun Dang Pharm

The modesty of its debt load may become crucial for Sam Chun Dang Pharm if management cannot prevent a repeat of the 54% cut to EBIT over the last year. When it comes to paying off debt, falling earnings are no more useful than sugary sodas are for your health. 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 Sam Chun Dang Pharm will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Sam Chun Dang Pharm 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. During the last three years, Sam Chun Dang Pharm burned a lot of cash. While that may be a result of expenditure for growth, it does make the debt far more risky.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that Sam Chun Dang Pharm has ₩50.3b in net cash. So although we see some areas for improvement, we're not too worried about Sam Chun Dang Pharm's balance sheet. 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 example - Sam Chun Dang Pharm has 1 warning sign we think you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.