Does Amotech (KOSDAQ:052710) Have A Healthy Balance Sheet?

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.' 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 note that Amotech Co., Ltd. (KOSDAQ:052710) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, 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 Amotech Carry?

As you can see below, Amotech had ₩109.6b of debt at September 2025, down from ₩121.1b a year prior. However, because it has a cash reserve of ₩28.9b, its net debt is less, at about ₩80.7b.

How Strong Is Amotech's Balance Sheet?

According to the last reported balance sheet, Amotech had liabilities of ₩142.9b due within 12 months, and liabilities of ₩32.9b due beyond 12 months. Offsetting these obligations, it had cash of ₩28.9b as well as receivables valued at ₩45.4b due within 12 months. So its liabilities total ₩101.6b more than the combination of its cash and short-term receivables.

This is a mountain of leverage relative to its market capitalization of ₩152.1b. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Amotech 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.

Check out our latest analysis for Amotech

In the last year Amotech wasn't profitable at an EBIT level, but managed to grow its revenue by 18%, to ₩257b. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Importantly, Amotech had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost ₩8.2b at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled ₩3.9b in negative free cash flow over the last twelve months. So suffice it to say we do consider the stock to be risky. 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 Amotech has 2 warning signs (and 1 which is significant) we think you should know about.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.