U.S. markets closed
  • S&P 500

    4,280.15
    +72.88 (+1.73%)
     
  • Dow 30

    33,761.05
    +424.35 (+1.27%)
     
  • Nasdaq

    13,047.19
    +267.29 (+2.09%)
     
  • Russell 2000

    2,016.62
    +41.36 (+2.09%)
     
  • Crude Oil

    91.88
    -0.21 (-0.23%)
     
  • Gold

    1,818.90
    +3.40 (+0.19%)
     
  • Silver

    20.83
    +0.14 (+0.66%)
     
  • EUR/USD

    1.0259
    -0.0067 (-0.65%)
     
  • 10-Yr Bond

    2.8490
    -0.0390 (-1.35%)
     
  • GBP/USD

    1.2139
    -0.0064 (-0.52%)
     
  • USD/JPY

    133.4320
    +0.4330 (+0.33%)
     
  • BTC-USD

    24,397.72
    -92.97 (-0.38%)
     
  • CMC Crypto 200

    574.64
    +3.36 (+0.59%)
     
  • FTSE 100

    7,500.89
    +34.98 (+0.47%)
     
  • Nikkei 225

    28,546.98
    +727.68 (+2.62%)
     

We Think Symbotic (NASDAQ:SYM) Can Afford To Drive Business Growth

  • Oops!
    Something went wrong.
    Please try again later.
·4 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

There's no doubt that money can be made by owning shares of unprofitable businesses. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

So, the natural question for Symbotic ( NASDAQ:SYM ) shareholders is whether they should be concerned by its rate of 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). First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

Check out our latest analysis for Symbotic

When Might Symbotic 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 Symbotic last reported its balance sheet in March 2022, it had zero debt and cash worth US$259m. Importantly, its cash burn was US$42m over the trailing twelve months. So it had a cash runway of about 6.2 years from March 2022. Importantly, though, analysts think that Symbotic will reach cashflow breakeven before then. In that case, it may never reach the end of its cash runway. You can see how its cash balance has changed over time in the image below.

debt-equity-history-analysis
debt-equity-history-analysis

How Well Is Symbotic Growing?

Notably, Symbotic actually ramped up its cash burn very hard and fast in the last year, by 154%, signifying heavy investment in the business. But shareholders are no doubt taking some confidence from the rockstar revenue growth of 331% during that same year. On balance, we'd say the company is improving over time. Clearly, however, the crucial factor is whether the company will grow its business going forward. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company .

Can Symbotic Raise More Cash Easily?

There's no doubt Symbotic seems to be in a fairly good position, when it comes to managing its cash burn, but even if it's only hypothetical, it's always worth asking how easily it could raise more money to fund growth. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Many companies end up issuing new shares to fund future growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.

Symbotic has a market capitalisation of US$8.3b and burnt through US$42m last year, which is 0.5% of the company's market value. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.

So, Should We Worry About Symbotic's Cash Burn?

It may already be apparent to you that we're relatively comfortable with the way Symbotic is burning through its cash. For example, we think its revenue growth suggests that the company is on a good path. While we must concede that its increasing cash burn is a bit worrying, the other factors mentioned in this article provide great comfort when it comes to the cash burn. It's clearly very positive to see that analysts are forecasting the company will break even fairly soon. Considering all the factors discussed in this article, we're not overly concerned about the company's cash burn, although we do think shareholders should keep an eye on how it develops. Separately, we looked at different risks affecting the company and spotted 3 warning signs for Symbotic (of which 1 is a bit unpleasant!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies, and this list of stocks growth stocks (according to analyst forecasts)

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.