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華爾街日報GGUMBI (KOSDAQ:407400) Is Making Moderate Use Of Debt
Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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 GGUMBI Inc. (KOSDAQ:407400) makes use of debt. But is this debt a concern to shareholders?
When Is Debt Dangerous?
Debt assists a business until the business has trouble paying it off, either with new capital or with free 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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.
How Much Debt Does GGUMBI Carry?
You can click the graphic below for the historical numbers, but it shows that as of September 2025 GGUMBI had ₩29.5b of debt, an increase on ₩22.0b, over one year. On the flip side, it has ₩15.9b in cash leading to net debt of about ₩13.7b.
How Strong Is GGUMBI's Balance Sheet?
We can see from the most recent balance sheet that GGUMBI had liabilities of ₩52.3b falling due within a year, and liabilities of ₩13.7b due beyond that. Offsetting these obligations, it had cash of ₩15.9b as well as receivables valued at ₩13.2b due within 12 months. So it has liabilities totalling ₩37.0b more than its cash and near-term receivables, combined.
GGUMBI has a market capitalization of ₩72.5b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since GGUMBI will need 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 trend.
View our latest analysis for GGUMBI
In the last year GGUMBI wasn't profitable at an EBIT level, but managed to grow its revenue by 71%, to ₩64b. With any luck the company will be able to grow its way to profitability.
Caveat Emptor
While we can certainly appreciate GGUMBI's revenue growth, its earnings before interest and tax (EBIT) loss is not ideal. To be specific the EBIT loss came in at ₩2.6b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled ₩2.9b in negative free cash flow over the last twelve months. So suffice it to say we do consider the stock to be risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example GGUMBI has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.
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.