We're Hopeful That Hydreight Technologies (CVE:NURS) Will Use Its Cash Wisely

Just because a business does not make any money, does not mean that the stock will go down. For example, Hydreight Technologies (CVE:NURS) shareholders have done very well over the last year, with the share price soaring by 177%. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

Given its strong share price performance, we think it's worthwhile for Hydreight Technologies shareholders to consider whether its cash burn is concerning. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

See our latest analysis for Hydreight Technologies

When Might Hydreight Technologies Run Out Of Money?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When Hydreight Technologies last reported its June 2024 balance sheet in August 2024, it had zero debt and cash worth CA$1.4m. In the last year, its cash burn was CA$501k. So it had a cash runway of about 2.8 years from June 2024. That's decent, giving the company a couple years to develop its business. Depicted below, you can see how its cash holdings have changed over time.

How Well Is Hydreight Technologies Growing?

Some investors might find it troubling that Hydreight Technologies is actually increasing its cash burn, which is up 45% in the last year. But looking on the bright side, its revenue gained by 77%, lending some credence to the growth narrative. Of course, with spend going up shareholders will want to see fast growth continue. On balance, we'd say the company is improving over time. Of course, we've only taken a quick look at the stock's growth metrics, here. You can take a look at how Hydreight Technologies is growing revenue over time by checking this visualization of past revenue growth.

Can Hydreight Technologies Raise More Cash Easily?

We are certainly impressed with the progress Hydreight Technologies has made over the last year, but it is also worth considering how costly it would be if it wanted to raise more cash to fund faster growth. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund 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.

Hydreight Technologies' cash burn of CA$501k is about 1.6% of its CA$31m market capitalisation. 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 Hydreight Technologies' Cash Burn A Worry?

It may already be apparent to you that we're relatively comfortable with the way Hydreight Technologies is burning through its cash. For example, we think its revenue growth suggests that the company is on a good path. Although its increasing cash burn does give us reason for pause, the other metrics we discussed in this article form a positive picture overall. Looking at all the measures in this article, together, we're not worried about its rate of cash burn, which seems to be under control. Separately, we looked at different risks affecting the company and spotted 5 warning signs for Hydreight Technologies (of which 3 shouldn't be ignored!) 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.