Just because a business does not make any money, does not mean that the stock will go down. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?
So should B90 Holdings (LON:B90) shareholders be worried about its cash burn? For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.
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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. As at December 2024, B90 Holdings had cash of €364k and no debt. Importantly, its cash burn was €480k over the trailing twelve months. So it had a cash runway of approximately 9 months from December 2024. Notably, however, the one analyst we see covering the stock thinks that B90 Holdings will break even (at a free cash flow level) 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.
See our latest analysis for B90 Holdings
Given our focus on B90 Holdings' cash burn, we're delighted to see that it reduced its cash burn by a nifty 92%. And while hardly exciting, it was still good to see revenue growth of 16% during that time. We think it is growing rather well, upon reflection. While the past is always worth studying, it is the future that matters most of all. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.
Even though it seems like B90 Holdings is developing its business nicely, we still like to consider how easily it could raise more money to accelerate growth. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. 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.