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We can readily understand why investors are attracted to unprofitable companies. Indeed, Emmerson Resources (ASX:ERM) stock is up 136% 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.
In light of its strong share price run, we think now is a good time to investigate how risky Emmerson Resources' cash burn is. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.
See our latest analysis for Emmerson Resources
Does Emmerson Resources 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. When Emmerson Resources last reported its December 2024 balance sheet in March 2025, it had zero debt and cash worth AU$6.4m. In the last year, its cash burn was AU$2.0m. Therefore, from December 2024 it had 3.2 years of cash runway. There's no doubt that this is a reassuringly long runway. Depicted below, you can see how its cash holdings have changed over time.
How Is Emmerson Resources' Cash Burn Changing Over Time?
Whilst it's great to see that Emmerson Resources has already begun generating revenue from operations, last year it only produced AU$164k, so we don't think it is generating significant revenue, at this point. Therefore, for the purposes of this analysis we'll focus on how the cash burn is tracking. While it hardly paints a picture of imminent growth, the fact that it has reduced its cash burn by 36% over the last year suggests some degree of prudence. Admittedly, we're a bit cautious of Emmerson Resources due to its lack of significant operating revenues. We prefer most of the stocks on this list of stocks that analysts expect to grow.
How Hard Would It Be For Emmerson Resources To Raise More Cash For Growth?
While Emmerson Resources is showing a solid reduction in its cash burn, it's still worth considering how easily it could raise more cash, even just to fuel 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. 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.