In This Article:
Just because a business does not make any money, does not mean that the stock will go down. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.
So should Lightspeed Commerce (TSE:LSPD) 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'.
Check out our latest analysis for Lightspeed Commerce
How Long Is Lightspeed Commerce'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. When Lightspeed Commerce last reported its December 2024 balance sheet in February 2025, it had zero debt and cash worth US$662m. Looking at the last year, the company burnt through US$74m. Therefore, from December 2024 it had 9.0 years of cash runway. Importantly, though, analysts think that Lightspeed Commerce will reach cashflow breakeven before then. In that case, it may never reach the end of its cash runway. The image below shows how its cash balance has been changing over the last few years.
How Well Is Lightspeed Commerce Growing?
It was fairly positive to see that Lightspeed Commerce reduced its cash burn by 42% during the last year. And considering that its operating revenue gained 22% during that period, that's great to see. We think it is growing rather well, upon reflection. Clearly, however, the crucial factor is whether the company will grow its business going forward. So you might want to take a peek at how much the company is expected to grow in the next few years.
How Easily Can Lightspeed Commerce Raise Cash?
We are certainly impressed with the progress Lightspeed Commerce 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. Commonly, a business will sell new shares in itself to raise cash and drive 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.