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Is POONGWON PRECISIONLtd (KOSDAQ:371950) A Risky Investment?

Simply Wall St · 5d ago

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that POONGWON PRECISION CO.,Ltd. (KOSDAQ:371950) does use debt in its business. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is POONGWON PRECISIONLtd's Debt?

As you can see below, at the end of September 2025, POONGWON PRECISIONLtd had ₩45.4b of debt, up from ₩42.5b a year ago. Click the image for more detail. However, it does have ₩2.31b in cash offsetting this, leading to net debt of about ₩43.1b.

debt-equity-history-analysis
KOSDAQ:A371950 Debt to Equity History January 6th 2026

How Strong Is POONGWON PRECISIONLtd's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that POONGWON PRECISIONLtd had liabilities of ₩63.0b due within 12 months and liabilities of ₩6.28b due beyond that. On the other hand, it had cash of ₩2.31b and ₩2.36b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₩64.7b.

While this might seem like a lot, it is not so bad since POONGWON PRECISIONLtd has a market capitalization of ₩256.5b, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since POONGWON PRECISIONLtd 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 POONGWON PRECISIONLtd

In the last year POONGWON PRECISIONLtd had a loss before interest and tax, and actually shrunk its revenue by 39%, to ₩31b. That makes us nervous, to say the least.

Caveat Emptor

Not only did POONGWON PRECISIONLtd's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). To be specific the EBIT loss came in at ₩19b. 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. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through ₩19b of cash over the last year. So suffice it to say we consider the stock very risky. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - POONGWON PRECISIONLtd has 2 warning signs we think 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.