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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, Hydreight Technologies (CVE:NURS) shareholders have done very well over the last year, with the share price soaring by 177%. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?
So notwithstanding the buoyant share price, we think it's well worth asking whether Hydreight Technologies' cash burn is too risky. 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). First, we'll determine its cash runway by comparing its cash burn with its cash reserves.
View our latest analysis for Hydreight Technologies
When Might Hydreight Technologies Run Out Of Money?
A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. In June 2024, Hydreight Technologies had CA$1.4m in cash, and was debt-free. Importantly, its cash burn was CA$501k over the trailing twelve months. So it had a cash runway of about 2.8 years from June 2024. 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 Hydreight Technologies Growing?
At first glance it's a bit worrying to see that Hydreight Technologies actually boosted its cash burn by 45%, year on year. But looking on the bright side, its revenue gained by 77%, lending some credence to the growth narrative. Of course, with spend going up shareholders will want to see fast growth continue. Considering the factors above, the company doesn’t fare badly when it comes to assessing how it is changing over time. In reality, this article only makes a short study of the company's growth data. You can take a look at how Hydreight Technologies is growing revenue over time by checking this visualization of past revenue growth.
Can Hydreight Technologies Raise More Cash Easily?
While Hydreight Technologies 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. 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. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.