Even if the business is losing money, shareholders can still make a profit if they buy a good business at the right price. For example, biotechnology companies and mining exploration companies often suffer years of losses before becoming successful in discovering new treatments or minerals. Nonetheless, only fools would ignore the risk of loss-making businesses running out of cash too quickly.
Considering this risk, kodiak science (NASDAQ:KOD) shareholders should worry about its cash burn. For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth. That negative free cash flow. Start by looking at your business’ cash compared to cash burn.
See the latest analysis from Kodiak Sciences
When will Kodiak Sciences run out of funds?
A company’s cash runway is the time it takes to deplete its cash reserves at current cash burn rates. As of September 2022, Kodiak Sciences has his US$537 million in cash and no debt. Last year’s cash burn was $263 million for him. This means it had about 2.0 years of cash runway as of September 2022. Without a doubt, this is a smart and sensible runway length. As you can see below, you can see how the cash holdings have changed over time.
How has Kodiak Sciences’ cash burn changed over time?
Kodiak Sciences did not record any revenue last year. This indicates that the company is an early stage company that is still in business. So you can’t look at sales figures to understand growth, but look at how cash burn is changing to understand how spending is trending over time The cash burn rate was up 27% last year, and the company appears to be gradually increasing its investment in the business over time. However, if spending continues to increase, the company’s true cash runway will be shorter than suggested above. The past is always worth studying, but the future is most important. As such, it might be interesting to see how much the company is expected to grow over the next few years.
Can Kodiak Sciences Raise More Cash Easily?
Kodiak Sciences has had a solid cash runway, but following the company’s cash burn trajectory may have some shareholders wondering when the company needs to raise more cash. . Corporations can raise capital either through debt or equity. One of the main advantages of a public company is the ability to sell shares to investors to raise cash and finance growth. Examining a company’s cash burn relative to its market capitalization provides insight into how much shareholders are diluted if the company needs to raise enough cash to cover another year’s cash burn. You can get
With a market capitalization of US$404 million, Kodiak Science’s US$263 million cash burn represents approximately 65% of its market value. Considering how large its cash burn is compared to the market value of the company as a whole, it is considered a high-risk stock with extremely dilutive potential.
How dangerous is the Kodiak Sciences cash burn situation?
It’s a little nerve-wracking to think about how much cash is burning relative to the market cap, but I have to mention that I thought Kodiak Science’s cash runway looked relatively promising.Looking at the factors mentioned in this short report, we think that cash burn is a bit risky and are a little nervous about the stock. and identified Two Warning Signs from Kodiak Sciences (1 is important!) Things to know before investing here.
of course Kodiak Sciences may not be the best strain to buySo you might want to watch this freedom A collection of companies with high return on equity, or this list of stocks that insiders are buying.
What are the risks and opportunities kodiak science?
Revenue less than US$1 million ($0)
Currently in the red and not expected to turn profitable in the next three years
See all risks and rewards
Do you have feedback on this article? What interests you? contact directly with us. Or send an email to our editorial team (at) Simplywallst.com.
This article by Simply Wall St is general in nature. We provide comments based on historical data and analyst projections using only unbiased methodologies and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. We aim to deliver long-term focused analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Is not …