Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. Indeed, I Synergy Group (ASX:IS3) stock is up 125% 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.

So notwithstanding the buoyant share price, we think it's well worth asking whether I Synergy Group's cash burn is too risky. For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

View our latest analysis for I Synergy Group

Does I Synergy Group 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. In June 2021, I Synergy Group had AU$2.7m in cash, and was debt-free. Looking at the last year, the company burnt through AU$2.6m. That means it had a cash runway of around 13 months as of June 2021. 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. You can see how its cash balance has changed over time in the image below.

How Well Is I Synergy Group Growing?

I Synergy Group boosted investment sharply in the last year, with cash burn ramping by 83%. As if that's not bad enough, the operating revenue also dropped by 29%, making us very wary indeed. Taken together, we think these growth metrics are a little worrying. Of course, we've only taken a quick look at the stock's growth metrics, here. You can take a look at how I Synergy Group has developed its business over time by checking this visualization of its revenue and earnings history.

How Easily Can I Synergy Group Raise Cash?

Since I Synergy Group can't yet boast improving growth metrics, the market will likely be considering how it can raise more cash if need be. 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.

I Synergy Group's cash burn of AU$2.6m is about 7.8% of its AU$33m market capitalisation. That's a low proportion, so we figure the company would be able to raise more cash to fund growth, with a little dilution, or even to simply borrow some money.