Is Mercury (KOSDAQ:100590) 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.' 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 Mercury Corporation (KOSDAQ:100590) does use debt in its business. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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 step when considering a company's debt levels is to consider its cash and debt together.

What Is Mercury's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Mercury had ₩10.9b of debt in September 2025, down from ₩11.9b, one year before. However, it does have ₩28.3b in cash offsetting this, leading to net cash of ₩17.4b.

How Strong Is Mercury's Balance Sheet?

We can see from the most recent balance sheet that Mercury had liabilities of ₩25.4b falling due within a year, and liabilities of ₩4.97b due beyond that. Offsetting these obligations, it had cash of ₩28.3b as well as receivables valued at ₩9.20b due within 12 months. So it actually has ₩7.07b more liquid assets than total liabilities.

This surplus suggests that Mercury has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Mercury boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is Mercury's earnings that will influence how the balance sheet holds up in the future. 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 Mercury

In the last year Mercury had a loss before interest and tax, and actually shrunk its revenue by 17%, to ₩115b. We would much prefer see growth.

So How Risky Is Mercury?

Although Mercury had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of ₩6.6b. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. With mediocre revenue growth in the last year, we're don't find the investment opportunity particularly compelling. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 2 warning signs for Mercury (1 is significant) you should be aware of.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.