Boardwalktech Software (CVE:BWLK) Is In A Strong Position To Grow Its Business

There's no doubt that money can be made by owning shares of unprofitable businesses. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

So should Boardwalktech Software (CVE:BWLK) shareholders be worried about its 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. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

View our latest analysis for Boardwalktech Software

When Might Boardwalktech Software Run Out Of Money?

You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. As at September 2022, Boardwalktech Software had cash of US$1.4m and no debt. Importantly, its cash burn was US$580k over the trailing twelve months. That means it had a cash runway of about 2.4 years as of September 2022. That's decent, giving the company a couple years to develop its business. The image below shows how its cash balance has been changing over the last few years.

How Well Is Boardwalktech Software Growing?

Happily, Boardwalktech Software is travelling in the right direction when it comes to its cash burn, which is down 81% over the last year. And revenue is up 25% in that same period; also a good sign. It seems to be growing nicely. In reality, this article only makes a short study of the company's growth data. This graph of historic earnings and revenue shows how Boardwalktech Software is building its business over time.

Can Boardwalktech Software Raise More Cash Easily?

There's no doubt Boardwalktech Software seems to be in a fairly good position, when it comes to managing its cash burn, but even if it's only hypothetical, it's always worth asking how easily it could raise more money to fund 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. 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).

Boardwalktech Software has a market capitalisation of US$26m and burnt through US$580k last year, which is 2.2% of the company's 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.

So, Should We Worry About Boardwalktech Software's Cash Burn?

It may already be apparent to you that we're relatively comfortable with the way Boardwalktech Software is burning through its cash. For example, we think its cash burn reduction suggests that the company is on a good path. And even its revenue growth was very encouraging. After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash. On another note, Boardwalktech Software has 4 warning signs (and 1 which is potentially serious) we think you should know about.

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.

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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.