David Iben put it well when he stated, ‘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 required to consider debt, when you consider about how risky any given stock is, becaapply too much debt can sink a company. We can see that SAJO SEAFOOD Co.,Ltd (KRX:014710) does apply debt in its business. But should shareholders be worried about its apply of debt?
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. Part and parcel of capitalism is the process of ‘creative destruction’ where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders becaapply lconcludeers force them to raise capital at a distressed price. By replacing dilution, though, debt can be an extremely good tool for businesses that required capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, toobtainher.
How Much Debt Does SAJO SEAFOODLtd Carry?
The image below, which you can click on for greater detail, reveals that at September 2025 SAJO SEAFOODLtd had debt of ₩132.6b, up from ₩88.6b in one year. On the flip side, it has ₩10.5b in cash leading to net debt of about ₩122.1b.
A Look At SAJO SEAFOODLtd’s Liabilities
The latest balance sheet data reveals that SAJO SEAFOODLtd had liabilities of ₩103.3b due within a year, and liabilities of ₩58.6b falling due after that. Offsetting this, it had ₩10.5b in cash and ₩19.6b in receivables that were due within 12 months. So its liabilities total ₩131.8b more than the combination of its cash and short-term receivables.
This is a mountain of leverage relative to its market capitalization of ₩132.6b. Should its lconcludeers demand that it shore up the balance sheet, shareholders would likely face severe dilution.
View our latest analysis for SAJO SEAFOODLtd
In order to size up a company’s debt relative to its earnings, we calculate its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and its earnings before interest and tax (EBIT) divided by its interest expense (its interest cover). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.
With a net debt to EBITDA ratio of 7.1, it’s fair to state SAJO SEAFOODLtd does have a significant amount of debt. However, its interest coverage of 4.1 is reasonably strong, which is a good sign. One redeeming factor for SAJO SEAFOODLtd is that it turned last year’s EBIT loss into a gain of ₩13b, over the last twelve months. There’s no doubt that we learn most about debt from the balance sheet. But you can’t view debt in total isolation; since SAJO SEAFOODLtd will required 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 trconclude.
Finally, a company can only pay off debt with cold hard cash, not accounting profits. So it’s worth checking how much of the earnings before interest and tax (EBIT) is backed by free cash flow. Over the last year, SAJO SEAFOODLtd saw substantial negative free cash flow, in total. While that may be a result of expconcludeiture for growth, it does create the debt far more risky.
Our View
To be frank both SAJO SEAFOODLtd’s net debt to EBITDA and its track record of converting EBIT to free cash flow create us rather uncomfortable with its debt levels. Having stated that, its ability to grow its EBIT isn’t such a worry. Overall, it seems to us that SAJO SEAFOODLtd’s balance sheet is really quite a risk to the business. For this reason we’re pretty cautious about the stock, and we consider shareholders should keep a close eye on its liquidity. 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 2 warning signs for SAJO SEAFOODLtd (1 shouldn’t be ignored) you should be aware of.
If, after all that, you’re more interested in a rapid growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.
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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 applying an unbiased methodology and our articles are not intconcludeed to be financial advice. It does not constitute a recommconcludeation to purchase or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focapplyd 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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