Is JLK (KOSDAQ:322510) Using Too Much Debt?
The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that JLK, Inc. (KOSDAQ:322510) 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. 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 examine debt levels, we first consider both cash and debt levels, together.
How Much Debt Does JLK Carry?
The image below, which you can click on for greater detail, shows that at September 2025 JLK had debt of ₩28.0b, up from ₩22.3b in one year. But it also has ₩51.4b in cash to offset that, meaning it has ₩23.4b net cash.
How Strong Is JLK's Balance Sheet?
Zooming in on the latest balance sheet data, we can see that JLK had liabilities of ₩24.0b due within 12 months and liabilities of ₩9.19b due beyond that. Offsetting this, it had ₩51.4b in cash and ₩1.56b in receivables that were due within 12 months. So it can boast ₩19.8b more liquid assets than total liabilities.
It's good to see that JLK has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, JLK boasts net cash, so it's fair to say it does not have a heavy debt load! 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 JLK 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.
See our latest analysis for JLK
Over 12 months, JLK reported revenue of ₩3.3b, which is a gain of 99%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.
So How Risky Is JLK?
Statistically speaking companies that lose money are riskier than those that make money. And we do note that JLK had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through ₩12b of cash and made a loss of ₩11b. While this does make the company a bit risky, it's important to remember it has net cash of ₩23.4b. That means it could keep spending at its current rate for more than two years. With very solid revenue growth in the last year, JLK may be on a path to profitability. Pre-profit companies are often risky, but they can also offer great rewards. 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 instance, we've identified 3 warning signs for JLK (1 is a bit unpleasant) 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.