Is Qualitas Semiconductor (KOSDAQ:432720) A Risky Investment?
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.' 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, Qualitas Semiconductor (KOSDAQ:432720) does carry debt. But the real question is whether this debt is making the company risky.
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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.
How Much Debt Does Qualitas Semiconductor Carry?
The image below, which you can click on for greater detail, shows that at September 2025 Qualitas Semiconductor had debt of ₩21.2b, up from ₩5.52b in one year. But it also has ₩68.0b in cash to offset that, meaning it has ₩46.8b net cash.
How Strong Is Qualitas Semiconductor's Balance Sheet?
The latest balance sheet data shows that Qualitas Semiconductor had liabilities of ₩12.7b due within a year, and liabilities of ₩27.0b falling due after that. Offsetting these obligations, it had cash of ₩68.0b as well as receivables valued at ₩598.3m due within 12 months. So it actually has ₩28.9b more liquid assets than total liabilities.
This short term liquidity is a sign that Qualitas Semiconductor could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Qualitas Semiconductor has more cash than debt is arguably a good indication that it can manage its debt safely. 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 Qualitas Semiconductor 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.
See our latest analysis for Qualitas Semiconductor
Over 12 months, Qualitas Semiconductor reported revenue of ₩7.4b, which is a gain of 32%, 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 Qualitas Semiconductor?
By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that Qualitas Semiconductor 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 ₩16b and booked a ₩19b accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of ₩46.8b. That kitty means the company can keep spending for growth for at least two years, at current rates. Qualitas Semiconductor's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. Pre-profit companies are often risky, but they can also offer great rewards. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Qualitas Semiconductor you should know about.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.