Yahoo Finance Will Barinthus Biotherapeutics (NASDAQ:BRNS) Spend Its Cash Wisely?
Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.
Given this risk, we thought we'd take a look at whether Barinthus Biotherapeutics (NASDAQ:BRNS) shareholders should be worried about its cash burn. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.
Check out our latest analysis for Barinthus Biotherapeutics
Does Barinthus Biotherapeutics Have A Long Cash Runway?
A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. When Barinthus Biotherapeutics last reported its balance sheet in September 2023, it had zero debt and cash worth US$160m. Looking at the last year, the company burnt through US$49m. That means it had a cash runway of about 3.3 years as of September 2023. A runway of this length affords the company the time and space it needs to develop the business. Depicted below, you can see how its cash holdings have changed over time.
How Well Is Barinthus Biotherapeutics Growing?
Notably, Barinthus Biotherapeutics actually ramped up its cash burn very hard and fast in the last year, by 187%, signifying heavy investment in the business. If that's not bad enough, it actually saw operating revenue decrease by a whopping 81% over the last year, suggesting the company is going through some sort of dangerous transition. Considering these two factors together makes us nervous about the direction the company seems to be heading. Clearly, however, the crucial factor is whether the company will grow its business going forward. So you might want to take a peek at how much the company is expected to grow in the next few years.
Can Barinthus Biotherapeutics Raise More Cash Easily?
Even though it seems like Barinthus Biotherapeutics is developing its business nicely, we still like to consider how easily it could raise more money to accelerate growth. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Many companies end up issuing new shares to fund future growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.
Barinthus Biotherapeutics' cash burn of US$49m is about 42% of its US$116m market capitalisation. That's high expenditure relative to the value of the entire company, so if it does have to issue shares to fund more growth, that could end up really hurting shareholders returns (through significant dilution).
Is Barinthus Biotherapeutics' Cash Burn A Worry?
Even though its increasing cash burn makes us a little nervous, we are compelled to mention that we thought Barinthus Biotherapeutics' cash runway was relatively promising. Summing up, we think the Barinthus Biotherapeutics' cash burn is a risk, based on the factors we mentioned in this article. On another note, Barinthus Biotherapeutics has 4 warning signs (and 2 which are potentially serious) we think you should know about.
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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.
