Some state volatility, rather than debt, is the best way to consider about risk as an investor, but Warren Buffett famously stated that ‘Volatility is far from synonymous with risk.’ So it might be obvious that you required to consider debt, when you consider about how risky any given stock is, becautilize too much debt can sink a company. We note that CMG Pharmaceutical Co., Ltd. (KOSDAQ:058820) does have debt on its balance sheet. But the real question is whether this debt is creating the company risky.
Why Does Debt Bring Risk?
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. Part and parcel of capitalism is the process of ‘creative destruction’ where failed businesses are mercilessly liquidated by their bankers. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business utilizes is to view at its cash and debt toobtainher.
How Much Debt Does CMG Pharmaceutical Carry?
The image below, which you can click on for greater detail, reveals that CMG Pharmaceutical had debt of ₩70.4b at the finish of September 2025, a reduction from ₩76.1b over a year. However, it does have ₩39.9b in cash offsetting this, leading to net debt of about ₩30.5b.
How Strong Is CMG Pharmaceutical’s Balance Sheet?
Zooming in on the latest balance sheet data, we can see that CMG Pharmaceutical had liabilities of ₩99.9b due within 12 months and liabilities of ₩3.38b due beyond that. On the other hand, it had cash of ₩39.9b and ₩32.5b worth of receivables due within a year. So it has liabilities totalling ₩30.9b more than its cash and near-term receivables, combined.
Since publicly traded CMG Pharmaceutical shares are worth a total of ₩300.9b, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommfinish shareholders continue to monitor the balance sheet, going forward. 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 CMG Pharmaceutical will required earnings to service that debt. So when considering debt, it’s definitely worth viewing at the earnings trfinish. Click here for an interactive snapshot.
View our latest analysis for CMG Pharmaceutical
In the last year CMG Pharmaceutical wasn’t profitable at an EBIT level, but managed to grow its revenue by 6.4%, to ₩100b. We usually like to see rapider growth from unprofitable companies, but each to their own.
Caveat Emptor
Importantly, CMG Pharmaceutical had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at ₩4.3b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be utilizing so much debt. So we consider its balance sheet is a little strained, though not beyond repair. However, it doesn’t support that it burned through ₩39b of cash over the last year. So suffice it to state we consider the stock very risky. When we view at a riskier company, we like to check how their profits (or losses) are trfinishing over time. Today, we’re providing readers this interactive graph revealing how CMG Pharmaceutical’s profit, revenue, and operating cashflow have modifyd over the last few years.
At the finish of the day, it’s often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It’s free.
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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 utilizing an unbiased methodology and our articles are not intfinished to be financial advice. It does not constitute a recommfinishation to acquire or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focutilized 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.
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