Companies Like VRX Silica (ASX:VRX) Are In A Position To Invest In Growth

There's no doubt that money can be made by owning shares of unprofitable businesses. Indeed, VRX Silica (ASX:VRX) stock is up 169% in the last year, providing strong gains for shareholders. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

So notwithstanding the buoyant share price, we think it's well worth asking whether VRX Silica's cash burn is too risky. 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. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Does VRX Silica Have A Long Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. In June 2025, VRX Silica had AU$4.1m in cash, and was debt-free. Importantly, its cash burn was AU$2.9m over the trailing twelve months. That means it had a cash runway of around 17 months as of June 2025. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. You can see how its cash balance has changed over time in the image below.

See our latest analysis for VRX Silica

How Is VRX Silica's Cash Burn Changing Over Time?

In our view, VRX Silica doesn't yet produce significant amounts of operating revenue, since it reported just AU$102k in the last twelve months. As a result, we think it's a bit early to focus on the revenue growth, so we'll limit ourselves to looking at how the cash burn is changing over time. While it hardly paints a picture of imminent growth, the fact that it has reduced its cash burn by 25% over the last year suggests some degree of prudence. Admittedly, we're a bit cautious of VRX Silica due to its lack of significant operating revenues. We prefer most of the stocks on this list of stocks that analysts expect to grow.

How Hard Would It Be For VRX Silica To Raise More Cash For Growth?

While VRX Silica is showing a solid reduction in its cash burn, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. Companies can raise capital through either debt or equity. Many companies end up issuing new shares to fund future growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.

VRX Silica has a market capitalisation of AU$78m and burnt through AU$2.9m last year, which is 3.7% of the company's market value. That's a low proportion, so we figure the company would be able to raise more cash to fund growth, with a little dilution, or even to simply borrow some money.

Is VRX Silica's Cash Burn A Worry?

The good news is that in our view VRX Silica's cash burn situation gives shareholders real reason for optimism. One the one hand we have its solid cash burn reduction, while on the other it can also boast very strong cash burn relative to its market cap. Based on the factors mentioned in this article, we think its cash burn situation warrants some attention from shareholders, but we don't think they should be worried. On another note, VRX Silica has 5 warning signs (and 2 which don't sit too well with us) we think you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies with significant insider holdings, and this list of stocks growth stocks (according to analyst forecasts)

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.