Yahoo Finance Here's Why We're Not Too Worried About Cadrenal Therapeutics' (NASDAQ:CVKD) Cash Burn Situation
There's no doubt that money can be made by owning shares of unprofitable businesses. 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. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?
So, the natural question for Cadrenal Therapeutics (NASDAQ:CVKD) shareholders is whether they should be concerned by its rate of 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.
Check out our latest analysis for Cadrenal Therapeutics
Does Cadrenal Therapeutics Have A Long Cash Runway?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. In September 2023, Cadrenal Therapeutics had US$9.1m in cash, and was debt-free. Looking at the last year, the company burnt through US$3.2m. So it had a cash runway of about 2.8 years from September 2023. That's decent, giving the company a couple years to develop its business. Depicted below, you can see how its cash holdings have changed over time.
How Easily Can Cadrenal Therapeutics Raise Cash?
Companies can raise capital through either debt or equity. 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.
Since it has a market capitalisation of US$21m, Cadrenal Therapeutics' US$3.2m in cash burn equates to about 16% of its market value. Given that situation, it's fair to say the company wouldn't have much trouble raising more cash for growth, but shareholders would be somewhat diluted.
Is Cadrenal Therapeutics' Cash Burn A Worry?
Given it's an early stage company, we don't have a lot of data with which to judge Cadrenal Therapeutics' cash burn. Certainly, we'd be more confident in the stock if it was generating operating revenue. Having said that, we can say that its cash runway was a real positive. In conclusion, we don't see why investors should be concerned with its cash burn, at least for some time. Taking a deeper dive, we've spotted 6 warning signs for Cadrenal Therapeutics you should be aware of, and 2 of them are potentially serious.
Of course Cadrenal Therapeutics 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.
