Just because a business does not make any money, does not mean that the stock will go down. 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. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

Given this risk, we thought we'd take a look at whether vTv Therapeutics (NASDAQ:VTVT) shareholders should 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'.

See our latest analysis for vTv Therapeutics

When Might vTv Therapeutics Run Out Of Money?

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 vTv Therapeutics last reported its June 2024 balance sheet in August 2024, it had zero debt and cash worth US$46m. In the last year, its cash burn was US$22m. So it had a cash runway of about 2.1 years from June 2024. That's decent, giving the company a couple years to develop its business. You can see how its cash balance has changed over time in the image below.

How Is vTv Therapeutics' Cash Burn Changing Over Time?

In our view, vTv Therapeutics doesn't yet produce significant amounts of operating revenue, since it reported just US$1.0m in the last twelve months. As a result, we think it's a bit early to focus on the revenue growth, so we'll limit ourselves to looking at how the cash burn is changing over time. As it happens, the company's cash burn reduced by 19% over the last year, which suggests that management are maintaining a fairly steady rate of business development, albeit with a slight decrease in spending. Admittedly, we're a bit cautious of vTv Therapeutics due to its lack of significant operating revenues. We prefer most of the stocks on this list of stocks that analysts expect to grow.

Can vTv Therapeutics Raise More Cash Easily?

Even though it has reduced its cash burn recently, shareholders should still consider how easy it would be for vTv Therapeutics to raise more cash in the future. Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive 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.