Just because a business does not make any money, does not mean that the stock will go down. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

So should Bigblu Broadband (LON:BBB) shareholders 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.

Check out our latest analysis for Bigblu Broadband

Does Bigblu Broadband Have A Long Cash Runway?

You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. In May 2022, Bigblu Broadband had UK£4.5m in cash, and was debt-free. Looking at the last year, the company burnt through UK£7.5m. That means it had a cash runway of around 7 months as of May 2022. Importantly, the one analyst we see covering the stock thinks that Bigblu Broadband will reach cashflow breakeven in around 16 months. Essentially, that means the company will either reduce its cash burn, or else require more cash. Depicted below, you can see how its cash holdings have changed over time.

How Well Is Bigblu Broadband Growing?

We reckon the fact that Bigblu Broadband managed to shrink its cash burn by 50% over the last year is rather encouraging. And operating revenue was up by 11% too. It seems to be growing nicely. While the past is always worth studying, it is the future that matters most of all. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

How Hard Would It Be For Bigblu Broadband To Raise More Cash For Growth?

Given Bigblu Broadband's revenue is receding, there's a considerable chance it will eventually need to raise more money to spend on driving growth. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. 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.

Bigblu Broadband's cash burn of UK£7.5m is about 31% of its UK£24m market capitalisation. That's fairly notable cash burn, so if the company had to sell shares to cover the cost of another year's operations, shareholders would suffer some costly dilution.