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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 Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. 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 should Singularity Future Technology (NASDAQ:SGLY) shareholders be worried about its 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). The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.
Check out our latest analysis for Singularity Future Technology
Does Singularity Future Technology Have A Long Cash Runway?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. When Singularity Future Technology last reported its March 2024 balance sheet in May 2024, it had zero debt and cash worth US$15m. In the last year, its cash burn was US$5.7m. Therefore, from March 2024 it had 2.6 years of cash runway. That's decent, giving the company a couple years to develop its business. Depicted below, you can see how its cash holdings have changed over time.
How Well Is Singularity Future Technology Growing?
Singularity Future Technology managed to reduce its cash burn by 86% over the last twelve months, which is extremely promising, when it comes to considering its need for cash. Unfortunately, however, operating revenue dropped 27% during the same time frame. Considering the factors above, the company doesn’t fare badly when it comes to assessing how it is changing over time. Of course, we've only taken a quick look at the stock's growth metrics, here. You can take a look at how Singularity Future Technology has developed its business over time by checking this visualization of its revenue and earnings history.
How Hard Would It Be For Singularity Future Technology To Raise More Cash For Growth?
While Singularity Future Technology 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. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. 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 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).