When Will ReWalk Robotics Ltd (RWLK) Come Back To Market?
As the USD $32.62M market cap ReWalk Robotics Ltd (NASDAQ:RWLK) released another year of negative earnings, investors may be on edge waiting for breakeven. The single most important question to ask when you’re investing in a loss-making company is – will they need to raise cash again, and if so, when? Today I’ve examined RWLK’s financial data to roughly assess when the company may need to raise new capital. Check out our latest analysis for ReWalk Robotics
What is cash burn?
With a negative operating cash flow of -$25.26M, RWLK is chipping away at its $16.26M cash reserves in order to run its business. The biggest threat facing RWLK’s investor is the company going out of business when it runs out of money and cannot raise any more capital. Not surprisingly, it is more common to find unprofitable companies in the fast-growth healthcare industry. The industry is highly competitive, with companies racing to invest in innovation at the risk of burning through its cash too fast.
When will RWLK need to raise more cash?
Over the last twelve months, opex (excluding one-offs) increased by 29.94%, which is rather substantial. My cash burn analysis suggests that, if RWLK continues to spend its cash reserves at this current high rate, it’ll have to raise capital within the next 7 months, which may be a surprise to some shareholders. Moreover, even if RWLK kept its opex level at $27.3M, it will still have to come to market within the next year. Even though this is analysis is fairly basic, and RWLK still can cut its overhead in the near future, or open a new line of credit instead of issuing new equity shares, the outcome of this analysis still helps us understand how sustainable the RWLK’s operation is, and when things may have to change.
What this means for you:
Are you a shareholder? In the context of your portfolio, you should always seek to diversify, especially if you have a relatively high exposure to RWLK. Hopefully, the analysis has shed some light on the risks you should bear in mind as a shareholder of RWLK, in particular, its tight cash runway moving forward. Now that we’ve accounted for opex growth, you should also look at expected revenue growth in order to gauge when the company may become breakeven.
Are you a potential investor? This analysis isn’t meant to deter you from buying RWLK, but rather, to help you understand the risks involved investing in loss-making companies. Now you know that if RWLK were to continue to grow its opex at a double-digit rate, it will not be able to sustain its operations given the current level of cash reserves. An opportunity may exist for you to enter into the stock at an attractive price, should RWLK come to market to fund its operations.
An experienced management team on the helm increases our confidence in the business – have a peek at RWLK’s CEO experience and the tenure of the board here. If you believe you should cushion your portfolio with something less risky, scroll through my list of highly profitable companies to add to your portfolio..
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
