Cinaport Acquisition Corp. III (CVE:CAC.P) continues its loss-making streak, announcing negative earnings for its latest financial year ending. Savvy investors should always reassess the situation of loss-making companies frequently, and keep informed about whether or not these businesses are in a strong cash position. Selling new shares may dilute the value of existing shares on issue, and since Cinaport Acquisition III is currently burning more cash than it is making, it’s likely the business will need funding for future growth. Cinaport Acquisition III may need to come to market again, but the question is, when? Below, I’ve analysed the most recent financial data to help answer this question.
What is cash burn?
Cinaport Acquisition III currently has CA$964k in the bank, with negative free cash flow of -CA$16.6k. The biggest threat facing Cinaport Acquisition III investors is the company going out of business when it runs out of money and cannot raise any more capital. Cinaport Acquisition III operates in the asset management and custody banks industry, which on average generates a positive earnings per share, meaning the majority of its peers are profitable. Cinaport Acquisition III faces the trade-off between running the risk of depleting its cash reserves too fast, or risk falling behind its profitable competitors by investing too slowly.
When will Cinaport Acquisition III need to raise more cash?
We can measure Cinaport Acquisition III's ongoing cash expenditure requirements by looking at free cash flow, which I define as cash flow from operations minus fixed capital investment, is a measure of how much cash a company generates/loses each year.
Even though this is analysis is fairly basic, and Cinaport Acquisition III still can cut its overhead in the near future, or open a new line of credit instead of issuing new shares, the outcome of this analysis still helps us understand how sustainable the Cinaport Acquisition III operation is, and when things may have to change.
I admit this is a fairly basic analysis for CAC.P's financial health. Other important fundamentals need to be considered as well. You should continue to research Cinaport Acquisition III to get a better picture of the company by looking at:
- Historical Performance: What has CAC.P's returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Cinaport Acquisition III’s board and the CEO’s back ground.
- Other High-Performing Stocks: If you believe you should cushion your portfolio with something less risky, scroll through our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2018. This may not be consistent with full year annual report figures. Operating expenses include only SG&A and one-year R&D.
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