WEBULL

Is EV Advanced MaterialLtd (KOSDAQ:131400) Using Debt Sensibly?

Simply Wall St · 3d ago

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the 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. We can see that EV Advanced Material Co.,Ltd (KOSDAQ:131400) does use debt in its business. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is EV Advanced MaterialLtd's Debt?

As you can see below, at the end of September 2025, EV Advanced MaterialLtd had ₩14.2b of debt, up from none a year ago. Click the image for more detail. However, it does have ₩15.6b in cash offsetting this, leading to net cash of ₩1.39b.

debt-equity-history-analysis
KOSDAQ:A131400 Debt to Equity History January 8th 2026

How Strong Is EV Advanced MaterialLtd's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that EV Advanced MaterialLtd had liabilities of ₩27.6b due within 12 months and liabilities of ₩6.21b due beyond that. Offsetting these obligations, it had cash of ₩15.6b as well as receivables valued at ₩4.45b due within 12 months. So it has liabilities totalling ₩13.8b more than its cash and near-term receivables, combined.

Given EV Advanced MaterialLtd has a market capitalization of ₩94.6b, it's hard to believe these liabilities pose much 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, EV Advanced MaterialLtd 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 you can't view debt in total isolation; since EV Advanced MaterialLtd 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.

Check out our latest analysis for EV Advanced MaterialLtd

Over 12 months, EV Advanced MaterialLtd made a loss at the EBIT level, and saw its revenue drop to ₩65b, which is a fall of 15%. We would much prefer see growth.

So How Risky Is EV Advanced MaterialLtd?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And we do note that EV Advanced MaterialLtd had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of ₩1.1b and booked a ₩25b accounting loss. But the saving grace is the ₩1.39b on the balance sheet. That means it could keep spending at its current rate for more than two years. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. 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. We've identified 2 warning signs with EV Advanced MaterialLtd (at least 1 which is concerning) , and understanding them should be part of your investment process.

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.