We're Hopeful That Curis (NASDAQ:CRIS) Will Use Its Cash Wisely
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 should Curis (NASDAQ:CRIS) shareholders be worried about its cash burn? In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.
See our latest analysis for Curis
Does Curis Have A Long Cash Runway?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. In June 2023, Curis had US$63m in cash, and was debt-free. In the last year, its cash burn was US$46m. Therefore, from June 2023 it had roughly 17 months of cash runway. Importantly, though, analysts think that Curis will reach cashflow breakeven before then. In that case, it may never reach the end of its cash runway. Depicted below, you can see how its cash holdings have changed over time.
How Well Is Curis Growing?
On balance, we think it's mildly positive that Curis trimmed its cash burn by 3.4% over the last twelve months. Unfortunately, however, operating revenue declined by 3.2% during the period. In light of the data above, we're fairly sanguine about the business growth trajectory. Clearly, however, the crucial factor is whether the company will grow its business going forward. So you might want to take a peek at how much the company is expected to grow in the next few years.
How Hard Would It Be For Curis To Raise More Cash For Growth?
Even though it seems like Curis is developing its business nicely, we still like to consider how easily it could raise more money to accelerate growth. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund 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.
Curis has a market capitalisation of US$25m and burnt through US$46m last year, which is 182% of the company's market value. That suggests the company may have some funding difficulties, and we'd be very wary of the stock.
Is Curis' Cash Burn A Worry?
Even though its cash burn relative to its market cap makes us a little nervous, we are compelled to mention that we thought Curis' cash runway was relatively promising. There's no doubt that shareholders can take a lot of heart from the fact that analysts are forecasting it will reach breakeven before too long. Cash burning companies are always on the riskier side of things, but after considering all of the factors discussed in this short piece, we're not too worried about its rate of cash burn. On another note, Curis has 5 warning signs (and 1 which is significant) we think you should know about.
Of course Curis may not be the best stock to buy. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.
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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.
