Just because a business does not make any money, does not mean that the stock will go down. For example, Nexalin Technology (NASDAQ:NXL) shareholders have done very well over the last year, with the share price soaring by 941%. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

Given its strong share price performance, we think it's worthwhile for Nexalin Technology shareholders to consider whether its cash burn is concerning. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. Let's start with an examination of the business' cash, relative to its cash burn.

Check out our latest analysis for Nexalin Technology

How Long Is Nexalin Technology's 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. In September 2024, Nexalin Technology had US$4.6m in cash, and was debt-free. Importantly, its cash burn was US$3.9m over the trailing twelve months. So it had a cash runway of approximately 14 months from September 2024. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. The image below shows how its cash balance has been changing over the last few years.

How Is Nexalin Technology's Cash Burn Changing Over Time?

Whilst it's great to see that Nexalin Technology has already begun generating revenue from operations, last year it only produced US$162k, so we don't think it is generating significant revenue, at this point. Therefore, for the purposes of this analysis we'll focus on how the cash burn is tracking. Over the last year its cash burn actually increased by 2.5%, which suggests that management are increasing investment in future growth, but not too quickly. That's not necessarily a bad thing, but investors should be mindful of the fact that will shorten the cash runway. 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 Hard Would It Be For Nexalin Technology To Raise More Cash For Growth?

While its cash burn is only increasing slightly, Nexalin Technology shareholders should still consider the potential need for further cash, down the track. 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.