Howard Marks put it properly when he mentioned that, fairly than worrying about share worth volatility, ‘The chance of everlasting loss is the danger I fear about… and each sensible investor I do know worries about.’ So it is perhaps apparent that it’s essential to think about debt, when you concentrate on how dangerous any given inventory is, as a result of an excessive amount of debt can sink an organization. We notice that Amkor Technology, Inc. (NASDAQ:AMKR) does have debt on its stability sheet. But ought to shareholders be apprehensive about its use of debt?

Why Does Debt Bring Risk?

Debt assists a enterprise till the enterprise has hassle paying it off, both with new capital or with free money stream. If issues get actually unhealthy, the lenders can take management of the enterprise. However, a extra normal (however nonetheless costly) state of affairs is the place an organization should dilute shareholders at an affordable share worth merely to get debt beneath management. Of course, debt might be an necessary software in companies, significantly capital heavy companies. The very first thing to do when contemplating how a lot debt a enterprise makes use of is to have a look at its money and debt collectively.

Check out our latest analysis for Amkor Technology

How Much Debt Does Amkor Technology Carry?

As you may see under, Amkor Technology had US$1.20b of debt, at March 2023, which is about the identical because the yr earlier than. You can click on the chart for larger element. However, it does have US$1.25b in money offsetting this, resulting in web money of US$54.2m.

How Healthy Is Amkor Technology’s Balance Sheet?

The newest stability sheet knowledge reveals that Amkor Technology had liabilities of US$1.46b due inside a yr, and liabilities of US$1.40b falling due after that. Offsetting this, it had US$1.25b in money and US$1.17b in receivables that have been due inside 12 months. So its liabilities outweigh the sum of its money and (near-term) receivables by US$437.8m.

Given Amkor Technology has a market capitalization of US$7.17b, it is onerous to consider these liabilities pose a lot risk. Having mentioned that, it is clear that we must always proceed to observe its stability sheet, lest it change for the more serious. Despite its noteworthy liabilities, Amkor Technology boasts web money, so it is truthful to say it doesn’t have a heavy debt load!

On the opposite hand, Amkor Technology noticed its EBIT drop by 9.2% within the final twelve months. If earnings proceed to say no at that charge the corporate might have growing problem managing its debt load. The stability sheet is clearly the realm to concentrate on when you find yourself analysing debt. But it’s future earnings, greater than something, that may decide Amkor Technology’s potential to keep up a wholesome stability sheet going ahead. So in the event you’re targeted on the longer term you may try this free report showing analyst profit forecasts.

Finally, whereas the tax-man might adore accounting income, lenders solely settle for chilly onerous money. While Amkor Technology has web money on its stability sheet, it is nonetheless price looking at its potential to transform earnings earlier than curiosity and tax (EBIT) to free money stream, to assist us perceive how rapidly it’s constructing (or eroding) that money stability. Looking at the latest three years, Amkor Technology recorded free money stream of 37% of its EBIT, which is weaker than we might count on. That’s not nice, in the case of paying down debt.

Summing Up

While it’s at all times wise to have a look at an organization’s whole liabilities, it is vitally reassuring that Amkor Technology has US$54.2m in web money. So we aren’t troubled with Amkor Technology’s debt use. There’s little question that we be taught most about debt from the stability sheet. However, not all funding threat resides throughout the stability sheet – removed from it. Be conscious that Amkor Technology is showing 1 warning sign in our investment analysis , you must learn about…

If you are serious about investing in companies that may develop income with out the burden of debt, then try 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 common in nature. We present commentary based mostly on historic knowledge and analyst forecasts solely utilizing an unbiased methodology and our articles are usually not meant to be monetary recommendation. It doesn’t represent a suggestion to purchase or promote any inventory, and doesn’t take account of your aims, or your monetary state of affairs. We intention to convey you long-term targeted evaluation pushed by basic knowledge. Note that our evaluation might not issue within the newest price-sensitive firm bulletins or qualitative materials. Simply Wall St has no place in any shares talked about.