Even when a company loses money, it is possible for shareholders to make money if they buy a good company at the right price. Indeed, International proteomics laboratories The stock (ASX: PIQ) rose 234% last year, delivering solid gains to shareholders. But while history praises these rare successes, those that fail are often forgotten; who remembers Pets.com?
So, despite the stock price soaring, we think it’s worth considering whether Proteomics International Laboratories’ cash consumption is too risky. In this article, we define cash consumption as its annual (negative) free cash flow, which is the amount of money a business spends each year to finance its growth. Let’s start with a review of the company’s cash flow, relative to its cash consumption.
Check out our latest review for Proteomics International Laboratories
How long does the Proteomics International Laboratories Cash Runway last?
A company’s cash flow track is the time it would take to spend its cash reserves at its current burn rate. As of December 2020, Proteomics International Laboratories had AU $ 7.5 million in cash and was debt free. Last year, its cash consumption amounted to AU $ 441,000. This means that he had a very many years cash trail as of December 2020. While this is only a measure of his cash consumption situation, it certainly gives us the impression that holders don’t have to. to worry. Below you can see how his cash holdings have evolved over time.
How does Proteomics International Laboratories’ cash consumption change over time?
Although Proteomics International Laboratories achieved sales of AU $ 2.4 million in the past twelve months, its Operating turnover was only A $ 1.1 million during this period. Given the weakness of this operating leverage, we believe it is too early to place much weight on revenue growth, so we will focus on the evolution of cash consumption. The good news, from a balance sheet perspective, is that it has actually reduced its cash usage by 86% over the past twelve months. While this hardly indicates any potential for growth, it does at least suggest that the company is trying to survive. Certainly, we are a little cautious of Proteomics International Laboratories due to their lack of significant operating revenues. So we generally prefer stocks from this list of stocks that analysts expect to grow.
How easily can Proteomics International laboratories raise cash?
While we are comforted by the recent obvious reduction in our analysis of Proteomics International Laboratories’ cash consumption, it is still worth considering how easily the company could raise more funds, if it wanted to accelerate spending to boost. the growth. The issuance of new shares or indebtedness are the most common ways for a listed company to raise more funds for its activities. Many companies end up issuing new shares to fund their future growth. By looking at a company’s cash consumption relative to its market capitalization, we gain insight into shareholder dilution if the company needed to raise enough cash to cover another year’s cash consumption.
Proteomics International Laboratories has a market capitalization of A $ 125 million and burned A $ 441,000 last year, or 0.4% of the company’s market value. This means that he could easily issue a few stocks to fund more growth and may well be able to borrow cheaply.
How risky is Proteomics International Laboratories’ cash flow situation?
It may already be obvious to you that we are relatively comfortable with the way Proteomics International Laboratories burns its money. For example, we believe that the reduction in cash consumption suggests that the business is on the right track. But it’s fair to say that its consumption of cash relative to its market cap was also very reassuring. After looking at a series of factors in this article, we’re pretty relaxed about its consumption of cash, as the company appears to be in a good position to continue funding its growth. On another note, Proteomics International Laboratories has 4 warning signs (and 1 which doesn’t suit us very well) we think you should know.
Of course, you might find a fantastic investment looking elsewhere. So take a look at this free list of companies that insiders buy, and this list of stock growth stocks (as predicted by analysts)
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