NASDAQ:VXRT) has seen its share price rise 1,293% over the last year, delighting many shareholders. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.” data-reactid=”28″>Just because a business does not make any money, does not mean that the stock will go down. By way of example, Vaxart (NASDAQ:VXRT) has seen its share price rise 1,293% over the last year, delighting many shareholders. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.
Given its strong share price performance, we think it’s worthwhile for Vaxart shareholders to consider whether its cash burn is concerning. In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. We’ll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.
See our latest analysis for Vaxart ” data-reactid=”30″>See our latest analysis for Vaxart
How Long Is Vaxart’s Cash Runway?
A company’s cash runway is calculated by dividing its cash hoard by its cash burn. In June 2020, Vaxart had US$44m in cash, and was debt-free. In the last year, its cash burn was US$12m. That means it had a cash runway of about 3.7 years as of June 2020. There’s no doubt that this is a reassuringly long runway. Depicted below, you can see how its cash holdings have changed over time.
How Well Is Vaxart Growing?
our analyst forecasts for the company.” data-reactid=”50″>It was fairly positive to see that Vaxart reduced its cash burn by 30% during the last year. Revenue also improved during the period, increasing by 3.4%. Considering the factors above, the company doesn’t fare badly when it comes to assessing how it is changing over time. 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.
How Hard Would It Be For Vaxart To Raise More Cash For Growth?
While Vaxart seems to be in a decent position, we reckon it is still worth thinking about how easily it could raise more cash, if that proved desirable. Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive growth. By comparing a company’s annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).
Since it has a market capitalisation of US$998m, Vaxart’s US$12m in cash burn equates to about 1.2% of its 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.
Is Vaxart’s Cash Burn A Worry?
2 warning signs for Vaxart you should be aware of, and 1 of them shouldn’t be ignored.” data-reactid=”55″>As you can probably tell by now, we’re not too worried about Vaxart’s cash burn. For example, we think its cash runway suggests that the company is on a good path. On this analysis its revenue growth was its weakest feature, but we are not concerned about it. After taking into account the various metrics mentioned in this report, we’re pretty comfortable with how the company is spending its cash, as it seems on track to meet its needs over the medium term. Taking a deeper dive, we’ve spotted 2 warning signs for Vaxart you should be aware of, and 1 of them shouldn’t be ignored.
list of interesting companies, that have HIGH return on equity and low debt or this list of stocks which are all forecast to grow.” data-reactid=”56″>If you would prefer to check out another company with better fundamentals, then do not miss this free list of interesting companies, that have HIGH return on equity and low debt or this list of stocks which are all forecast to grow.
Get in touch with us directly. Alternatively, email [email protected].” data-reactid=”61″>This article by Simply Wall St is general in nature. 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.