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Just because a business does not make any money, does not mean that the stock will go down. Indeed, Inogen (NASDAQ:INGN) stock is up 107% in the last year, providing strong gains for shareholders. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.
Given its strong share price performance, we think it's worthwhile for Inogen shareholders to consider whether its cash burn is concerning. 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). We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.
View our latest analysis for Inogen
How Long Is Inogen's Cash Runway?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. As at June 2024, Inogen had cash of US$118m and no debt. In the last year, its cash burn was US$20m. Therefore, from June 2024 it had 6.0 years of cash runway. Importantly, though, analysts think that Inogen will reach cashflow breakeven before then. If that happens, then the length of its cash runway, today, would become a moot point. Depicted below, you can see how its cash holdings have changed over time.
How Well Is Inogen Growing?
Happily, Inogen is travelling in the right direction when it comes to its cash burn, which is down 64% over the last year. But it was a bit disconcerting to see operating revenue down 6.5% in that time. Considering the factors above, the company doesn’t fare badly when it comes to assessing how it is changing over time. 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.
Can Inogen Raise More Cash Easily?
While Inogen seems to be in a decent position, we reckon it is still worth thinking about how easily it could raise more cash, if that proved desirable. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. Commonly, a business will sell new shares in itself to raise cash and drive 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).
Since it has a market capitalisation of US$257m, Inogen's US$20m in cash burn equates to about 7.7% of its market value. Given that is a rather small percentage, it would probably be really easy for the company to fund another year's growth by issuing some new shares to investors, or even by taking out a loan.