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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. 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 history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?
Given this risk, we thought we'd take a look at whether MaxCyte (LON:MXCT) shareholders should 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'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.
See our latest analysis for MaxCyte
Does MaxCyte Have A Long Cash Runway?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. When MaxCyte last reported its June 2024 balance sheet in August 2024, it had zero debt and cash worth US$157m. Looking at the last year, the company burnt through US$25m. So it had a cash runway of about 6.2 years from June 2024. Even though this is but one measure of the company's cash burn, the thought of such a long cash runway warms our bellies in a comforting way. The image below shows how its cash balance has been changing over the last few years.
How Well Is MaxCyte Growing?
We reckon the fact that MaxCyte managed to shrink its cash burn by 26% over the last year is rather encouraging. And operating revenue was up by 12% too. On balance, we'd say the company is improving over time. While the past is always worth studying, it is the future that matters most of all. So you might want to take a peek at how much the company is expected to grow in the next few years.
Can MaxCyte Raise More Cash Easily?
We are certainly impressed with the progress MaxCyte 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. Companies can raise capital through either debt or equity. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund 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.
MaxCyte's cash burn of US$25m is about 5.7% of its US$444m 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.