Companies Like AFC Ajax (AMS:AJAX) Are In A Position To Invest In Growth

editorial-team@simplywallst.com (Simply Wall St)

Wed, Apr 16, 2025, 10:19 PM 4 min read

We can readily understand why investors are attracted to unprofitable companies. 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 AFC Ajax (AMS:AJAX) 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'.

We check all companies for important risks. See what we found for AFC Ajax in our free report.

Does AFC Ajax Have A Long Cash Runway?

A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. When AFC Ajax last reported its December 2024 balance sheet in February 2025, it had zero debt and cash worth €71m. In the last year, its cash burn was €39m. That means it had a cash runway of around 22 months as of December 2024. Notably, however, the one analyst we see covering the stock thinks that AFC Ajax will break even (at a free cash flow level) before then. If that happens, then the length of its cash runway, today, would become a moot point. The image below shows how its cash balance has been changing over the last few years.

debt-equity-history-analysis — ENXTAM:AJAX Debt to Equity History April 17th 2025

View our latest analysis for AFC Ajax

How Well Is AFC Ajax Growing?

AFC Ajax boosted investment sharply in the last year, with cash burn ramping by 52%. That does give us pause, and we can't take much solace in the operating revenue growth of 5.3% in the same time frame. Considering both these factors, we're not particularly excited by its growth profile. 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.

How Hard Would It Be For AFC Ajax To Raise More Cash For Growth?

While AFC Ajax seems to be in a fairly good position, it's still worth considering how easily it could raise more cash, even just to fuel 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).

AFC Ajax's cash burn of €39m is about 21% of its €183m market capitalisation. That's not insignificant, and if the company had to sell enough shares to fund another year's growth at the current share price, you'd likely witness fairly costly dilution.

How Risky Is AFC Ajax's Cash Burn Situation?

It may already be apparent to you that we're relatively comfortable with the way AFC Ajax is burning through its cash. In particular, we think its cash runway stands out as evidence that the company is well on top of its spending. Although its increasing cash burn does give us reason for pause, the other metrics we discussed in this article form a positive picture overall. There's no doubt that shareholders can take a lot of heart from the fact that at least one analyst is forecasting it will reach breakeven before too long. 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. For us, it's always important to consider risks around cash burn rates. But investors should look at a whole range of factors when researching a new stock. For example, it could be interesting to see how much the AFC Ajax CEO receives in total remuneration.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies with significant insider holdings, and this list of stocks growth stocks (according to analyst forecasts)

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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.