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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 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, the natural question for Anixa Biosciences (NASDAQ:ANIX) shareholders is whether they should be concerned by its rate of cash burn. For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). Let's start with an examination of the business' cash, relative to its cash burn.
Check out our latest analysis for Anixa Biosciences
How Long Is Anixa Biosciences' Cash Runway?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. In July 2023, Anixa Biosciences had US$26m in cash, and was debt-free. In the last year, its cash burn was US$5.8m. That means it had a cash runway of about 4.4 years as of July 2023. There's no doubt that this is a reassuringly long runway. The image below shows how its cash balance has been changing over the last few years.
How Is Anixa Biosciences' Cash Burn Changing Over Time?
In our view, Anixa Biosciences doesn't yet produce significant amounts of operating revenue, since it reported just US$210k in the last twelve months. As a result, we think it's a bit early to focus on the revenue growth, so we'll limit ourselves to looking at how the cash burn is changing over time. It seems likely that the business is content with its current spending, as the cash burn rate stayed steady over the last twelve months. 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.
How Hard Would It Be For Anixa Biosciences To Raise More Cash For Growth?
While Anixa Biosciences is showing a solid reduction in its cash burn, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. Companies can raise capital through either debt or equity. Many companies end up issuing new shares to fund future growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.