Just because a business does not make any money, does not mean that the stock will go down. 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. 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.
So should Access Intelligence (LON:ACC) shareholders be worried about its cash burn? 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. Let's start with an examination of the business' cash, relative to its cash burn.
Check out our latest analysis for Access Intelligence
How Long Is Access Intelligence's Cash Runway?
You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. In May 2023, Access Intelligence had UK£2.7m in cash, and was debt-free. In the last year, its cash burn was UK£4.1m. Therefore, from May 2023 it had roughly 8 months of cash runway. Importantly, analysts think that Access Intelligence will reach cashflow breakeven in around 11 months. That means it doesn't have a great deal of breathing room, but it shouldn't really need more cash, considering that cash burn should be continually reducing. Depicted below, you can see how its cash holdings have changed over time.
How Well Is Access Intelligence Growing?
We reckon the fact that Access Intelligence managed to shrink its cash burn by 35% over the last year is rather encouraging. And operating revenue was up by 17% too. On balance, we'd say the company is improving over time. 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.
Can Access Intelligence Raise More Cash Easily?
Since Access Intelligence revenue has been falling, the market will likely be considering how it can raise more cash if need be. Companies can raise capital through either debt or equity. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.
Access Intelligence's cash burn of UK£4.1m is about 5.5% of its UK£75m market capitalisation. 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.