We're Not Worried About Greenheart Gold's (CVE:GHRT) Cash Burn

We can readily understand why investors are attracted to unprofitable companies. 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?

So, the natural question for Greenheart Gold (CVE:GHRT) shareholders is whether they should be concerned by its rate of cash burn. 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. Let's start with an examination of the business' cash, relative to its cash burn.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

When Might Greenheart Gold Run Out Of Money?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. As at December 2024, Greenheart Gold had cash of CA$46m and no debt. Looking at the last year, the company burnt through CA$4.0m. That means it had a cash runway of very many years as of December 2024. Even though this is but one measure of the company's cash burn, the thought of such a long cash runway warms our bellies in a comforting way. Depicted below, you can see how its cash holdings have changed over time.

Check out our latest analysis for Greenheart Gold

How Hard Would It Be For Greenheart Gold To Raise More Cash For Growth?

Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. Commonly, a business will sell new shares in itself to raise cash and drive growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.

Since it has a market capitalisation of CA$131m, Greenheart Gold's CA$4.0m in cash burn equates to about 3.1% of its 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.

So, Should We Worry About Greenheart Gold's Cash Burn?

Because Greenheart Gold is an early stage company, we don't have a great deal of data on which to form an opinion of its cash burn. Certainly, we'd be more confident in the stock if it was generating operating revenue. However, it is fair to say that its cash runway gave us comfort. Summing up, its cash burn doesn't bother us and we're excited to see what kind of growth it can achieve with its current cash hoard. Separately, we looked at different risks affecting the company and spotted 3 warning signs for Greenheart Gold (of which 1 is potentially serious!) you should know about.

Of course Greenheart Gold may not be the best stock to buy. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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.