Is Magnachip Semiconductor (NYSE:MX) Using Too Much Debt?

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. As with many other companies Magnachip Semiconductor Corporation (NYSE:MX) makes use of debt. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

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 Magnachip Semiconductor's Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 Magnachip Semiconductor had US$38.9m of debt, an increase on US$30.3m, over one year. But it also has US$108.0m in cash to offset that, meaning it has US$69.1m net cash.

How Healthy Is Magnachip Semiconductor's Balance Sheet?

The latest balance sheet data shows that Magnachip Semiconductor had liabilities of US$45.7m due within a year, and liabilities of US$58.6m falling due after that. Offsetting these obligations, it had cash of US$108.0m as well as receivables valued at US$35.6m due within 12 months. So it actually has US$39.3m more liquid assets than total liabilities.

This surplus liquidity suggests that Magnachip Semiconductor's balance sheet could take a hit just as well as Homer Simpson's head can take a punch. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Succinctly put, Magnachip Semiconductor 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 ultimately the future profitability of the business will decide if Magnachip Semiconductor can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

See our latest analysis for Magnachip Semiconductor

In the last year Magnachip Semiconductor wasn't profitable at an EBIT level, but managed to grow its revenue by 15%, to US$225m. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Magnachip Semiconductor?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Magnachip Semiconductor had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of US$45m and booked a US$40m accounting loss. But at least it has US$69.1m on the balance sheet to spend on growth, near-term. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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 example - Magnachip Semiconductor has 1 warning sign we think you should be aware of.

At the end 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 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.