Yahoo Finance Is Cellectar Biosciences (NASDAQ:CLRB) In A Good Position To Deliver On Growth Plans?
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, Cellectar Biosciences (NASDAQ:CLRB) shareholders have done very well over the last year, with the share price soaring by 112%. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.
Given its strong share price performance, we think it's worthwhile for Cellectar Biosciences shareholders to consider whether its cash burn is concerning. In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.
Check out our latest analysis for Cellectar Biosciences
How Long Is Cellectar Biosciences' Cash Runway?
A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. As at March 2024, Cellectar Biosciences had cash of US$40m and no debt. Importantly, its cash burn was US$39m over the trailing twelve months. Therefore, from March 2024 it had roughly 12 months of cash runway. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. Depicted below, you can see how its cash holdings have changed over time.
How Is Cellectar Biosciences' Cash Burn Changing Over Time?
Because Cellectar Biosciences isn't currently generating revenue, we consider it an early-stage business. Nonetheless, we can still examine its cash burn trajectory as part of our assessment of its cash burn situation. Over the last year its cash burn actually increased by 43%, which suggests that management are increasing investment in future growth, but not too quickly. That's not necessarily a bad thing, but investors should be mindful of the fact that will shorten the cash runway. While the past is always worth studying, it is the future that matters most of all. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.
How Hard Would It Be For Cellectar Biosciences To Raise More Cash For Growth?
While Cellectar Biosciences does have a solid cash runway, its cash burn trajectory may have some shareholders thinking ahead to when the company may need to raise more cash. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. Commonly, a business will sell new shares in itself to raise cash and drive growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).
Since it has a market capitalisation of US$117m, Cellectar Biosciences' US$39m in cash burn equates to about 34% of its market value. That's fairly notable cash burn, so if the company had to sell shares to cover the cost of another year's operations, shareholders would suffer some costly dilution.
Is Cellectar Biosciences' Cash Burn A Worry?
On this analysis of Cellectar Biosciences' cash burn, we think its cash runway was reassuring, while its cash burn relative to its market cap has us a bit worried. Summing up, we think the Cellectar Biosciences' cash burn is a risk, based on the factors we mentioned in this article. Readers need to have a sound understanding of business risks before investing in a stock, and we've spotted 3 warning signs for Cellectar Biosciences that potential shareholders should take into account before putting money into a stock.
Of course Cellectar Biosciences may not be the best stock to buy. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.
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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.
