We Think FINEOS Corporation Holdings (ASX:FCL) Can Easily Afford To Drive Business Growth

There's no doubt that money can be made by owning shares of unprofitable businesses. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

Given this risk, we thought we'd take a look at whether FINEOS Corporation Holdings (ASX:FCL) shareholders should be worried about its cash burn. For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

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How Long Is FINEOS Corporation Holdings' Cash Runway?

A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. As at December 2024, FINEOS Corporation Holdings had cash of €20m and no debt. Looking at the last year, the company burnt through €9.0m. That means it had a cash runway of about 2.2 years as of December 2024. Importantly, though, analysts think that FINEOS Corporation Holdings will reach cashflow breakeven before then. If that happens, then the length of its cash runway, today, would become a moot point. You can see how its cash balance has changed over time in the image below.

See our latest analysis for FINEOS Corporation Holdings

How Well Is FINEOS Corporation Holdings Growing?

Happily, FINEOS Corporation Holdings is travelling in the right direction when it comes to its cash burn, which is down 79% over the last year. And while hardly exciting, it was still good to see revenue growth of 9.0% during that time. It seems to be growing nicely. While the past is always worth studying, it is the future that matters most of all. So you might want to take a peek at how much the company is expected to grow in the next few years .

Can FINEOS Corporation Holdings Raise More Cash Easily?

While FINEOS Corporation Holdings 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. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. 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.

Since it has a market capitalisation of €326m, FINEOS Corporation Holdings' €9.0m in cash burn equates to about 2.7% of its market value. So it could almost certainly just borrow a little to fund another year's growth, or else easily raise the cash by issuing a few shares.

Is FINEOS Corporation Holdings' Cash Burn A Worry?

It may already be apparent to you that we're relatively comfortable with the way FINEOS Corporation Holdings is burning through its cash. For example, we think its cash burn reduction 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. There's no doubt that shareholders can take a lot of heart from the fact that analysts are forecasting it will reach breakeven before too long. Taking all the factors in this report into account, we're not at all worried about its cash burn, as the business appears well capitalized to spend as needs be. Notably, our data indicates that FINEOS Corporation Holdings insiders have been trading the shares. You can discover if they are buyers or sellers by clicking on this link .

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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.