Yahoo Finance We're Not Worried About Y-mAbs Therapeutics' (NASDAQ:YMAB) Cash Burn
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, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.
So should Y-mAbs Therapeutics (NASDAQ:YMAB) shareholders 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'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.
See our latest analysis for Y-mAbs Therapeutics
Does Y-mAbs Therapeutics Have A Long Cash Runway?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. In March 2024, Y-mAbs Therapeutics had US$76m in cash, and was debt-free. Looking at the last year, the company burnt through US$18m. That means it had a cash runway of about 4.3 years as of March 2024. There's no doubt that this is a reassuringly long runway. Depicted below, you can see how its cash holdings have changed over time.
How Well Is Y-mAbs Therapeutics Growing?
Y-mAbs Therapeutics managed to reduce its cash burn by 73% over the last twelve months, which suggests it's on the right flight path. And it could also show revenue growth of 13% in the same period. We think it is growing rather well, upon reflection. While the past is always worth studying, it is the future that matters most of all. So you might want to take a peek at how much the company is expected to grow in the next few years.
Can Y-mAbs Therapeutics Raise More Cash Easily?
We are certainly impressed with the progress Y-mAbs Therapeutics has made over the last year, but it is also worth considering how costly it would be if it wanted to raise more cash to fund faster 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 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).
Y-mAbs Therapeutics has a market capitalisation of US$530m and burnt through US$18m last year, which is 3.3% of the company's market value. That's a low proportion, so we figure the company would be able to raise more cash to fund growth, with a little dilution, or even to simply borrow some money.
So, Should We Worry About Y-mAbs Therapeutics' Cash Burn?
It may already be apparent to you that we're relatively comfortable with the way Y-mAbs Therapeutics is burning through its cash. For example, we think its cash runway suggests that the company is on a good path. Its revenue growth wasn't quite as good, but was still rather encouraging! After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash, as it seems on track to meet its needs over the medium term. Separately, we looked at different risks affecting the company and spotted 3 warning signs for Y-mAbs Therapeutics (of which 1 shouldn't be ignored!) you should know about.
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