Just because a business is not profitable does not necessarily mean that its stock will plummet. Take Amazon.com, for example. Despite experiencing losses for many years after going public, those who bought and held onto the shares since 1999 would have seen significant returns. However, it’s important to note that unprofitable companies can be risky as they have the potential to exhaust all their cash reserves and face financial distress.
In this analysis, we will be looking at Intervacc (STO:IVACC) to determine if its cash burn rate is a cause for concern. Cash burn refers to the amount of cash a company is using up over a specific period, which can impact its financial stability. By comparing Intervacc’s cash burn with its cash reserves, we can calculate its cash runway, or how long the company can sustain its operations with its current cash holdings.
As of March 2024, Intervacc had kr72m in cash and minimal debt. With a cash burn of kr54m over the past year, the company had a cash runway of approximately 16 months. While this may not be alarming, shareholders should consider the implications if the company were to run out of cash. Monitoring the company’s cash holdings over time can provide valuable insights into its financial health.
Despite generating minimal operating revenue of kr8.9m in the last twelve months, Intervacc’s cash burn has decreased by 17%. This suggests that management is controlling spending to support the company’s growth plans. Looking ahead, it’s essential to assess the company’s growth prospects in the coming years.
While Intervacc is making progress in reducing its cash burn, it’s important to evaluate its ability to raise additional funds for future growth. Issuing new shares or taking on debt are common methods for companies to raise capital. Considering Intervacc’s cash burn relative to its market capitalization, shareholders could face dilution if the company needed to raise more funds to cover its operations for another year.
Overall, while Intervacc’s reduced cash burn is positive, shareholders should be mindful of the potential challenges of raising additional capital in the future. Conducting a thorough analysis of the company’s financial health and growth prospects is essential for informed investment decisions.