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Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.
Given this risk, we thought we'd take a look at whether Boardwalktech Software (CVE:BWLK) shareholders should be worried about its cash burn. 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. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.
View our latest analysis for Boardwalktech Software
When Might Boardwalktech Software Run Out Of Money?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. In March 2021, Boardwalktech Software had US$3.1m in cash, and was debt-free. In the last year, its cash burn was US$3.0m. So it had a cash runway of approximately 13 months from March 2021. That's not too bad, but it's fair to say the end of the cash runway is in sight, unless cash burn reduces drastically. Depicted below, you can see how its cash holdings have changed over time.
How Well Is Boardwalktech Software Growing?
Notably, Boardwalktech Software actually ramped up its cash burn very hard and fast in the last year, by 147%, signifying heavy investment in the business. As if that's not bad enough, the operating revenue also dropped by 6.3%, making us very wary indeed. Considering these two factors together makes us nervous about the direction the company seems to be heading. In reality, this article only makes a short study of the company's growth data. You can take a look at how Boardwalktech Software has developed its business over time by checking this visualization of its revenue and earnings history.
Can Boardwalktech Software Raise More Cash Easily?
Since Boardwalktech Software can't yet boast improving growth metrics, the market will likely be considering how it can raise more cash if need be. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. 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.
Boardwalktech Software's cash burn of US$3.0m is about 11% of its US$27m market capitalisation. As a result, we'd venture that the company could raise more cash for growth without much trouble, albeit at the cost of some dilution.
So, Should We Worry About Boardwalktech Software's Cash Burn?
Even though its increasing cash burn makes us a little nervous, we are compelled to mention that we thought Boardwalktech Software's cash burn relative to its market cap was relatively promising. We don't think its cash burn is particularly problematic, but after considering the range of factors in this article, we do think shareholders should be monitoring how it changes over time. Taking a deeper dive, we've spotted 5 warning signs for Boardwalktech Software you should be aware of, and 2 of them can't be ignored.
Of course Boardwalktech Software 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 that insiders are buying.
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Access Free AnalysisThis 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.
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About TSXV:BWLK
Boardwalktech Software
Provides enterprise software-as-a-service solutions worldwide.
Moderate risk and slightly overvalued.
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Trending Discussion
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anthony_x0j2w on Platform Group SE KGaA ·
Hello,(I am a shareholder).I spent the summer investigating in whatever I was able to find in the press, the trustee, or legal, and comparing it to FS Benner's declaration/transcripts:press: MM has a tendancy to use facts, modify them and turn them the way they want: 100% of their claims against TPG0 is traçable factually, 80% is flawed and interpreted. Example are numerous: 11M loans banks to be paid seems right, but it has not been an issue at all, it has been paid in full. (and it happens all the time in every business...); the previous HR becoming a financial director in the article herself being attacked by TPG on the legal side; the wrong address of curator (if truly announced by TPG).Trustee: according to my research (which can be incomplete) no communication to the Nordic trustee (hereby, bond holders) has been done on a, indebtedness (late payment) > 1M€, which is their obligation by contract (clause 14.d - https://corporate.the-platform-group.com/bond/) => this is a sign of a huge lie and fraud, or the sign that there is no indebtedness > 1M€ over the whole TPG group.Legal: still awaiting for an answer, probable that I won't get it.VALUATIONYou can spent hours working the fundamentals, if they're flawed...the thesis falls.Anyway, I always substracts the badwill (that I consider non-current - you have it in the CFS) & non-controlling interests from my valuation:Earnings ~22MFCF ~40M€The financial statements are not the issue here, we are more on an cheap option on the sincerity of the accounts that a real valuation. Unfortunately, these are unverifiable elements, hence the low price./!\ Careful:the accounts are consolidated and skip the subsidiaries issues...Careful with the business model: TPG0 is a financial holding that acquire subsidiaries, hold the debt, and has no operations. 100% of the Cash Flow comes from subs' dividends => it is a risk here, more a plumber risk than an operational one, but nevertheless...The auditor is too small, and managed by the same firm than before, with 140K€/year commission => it's too low, nobody external really reviewed what Benner and his team are doing internallycapital increase do not go through the CFS, but through change in equity AND equity in the BSIf the equity stays low too long, the WACC increase will be unbearable (I have a 30% global, with a 118% on equity): diluting is expensive => TPG machine can stay broken for a while.Most of the people I talk with never saw this, while this is ESSENTIAL to Benner's business model.SEVERAL EVENTS THAT COULD CHANGE:AEP is being audited by KPMG: if Benner plays the "we will propose KPMG to our shareholders BEOY", this can increase the trust in him significantly/KPMG (or other) to validate the 2026 IFRS accounts & having a word on HGB's: though still consolidated, at least we'll know...AEP being eventually acquired: while it carries a high integration risk due to its size, they talked about it so many times, that trust goes with it.Without this combination of event, the equity is doomed to stay at this level, IMO.Do not forget to also follow the bond: with TPG's announced safe harbor plan for buyback (25% of daily exchange), it is also interesting to check this illiquid and retail market: https://live.deutsche-boerse.com/bond/no0013256834-the-platform-group-ag-8-875-24-28?mic=XFRA
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Constantin_Mar on Platform Group SE KGaA ·
Quite a lot of speculation presented as if it were evidence.You are combining alleged payment disputes, alleged bank actions, legal disputes with journalists and other unverified claims to imply that TPG’s financial reporting is somehow unreliable or that the company is approaching insolvency. That’s a very serious conclusion, but the evidence you’ve presented doesn’t establish it.TPG’s financial statements, share count, debt, cash flow and acquisitions can all be checked against official filings and corporate documents. That’s called due diligence. Repeating allegations and then pointing to a low P/E doesn’t prove anything.In fact, the P/E below 1 is precisely the reason the underlying numbers need to be investigated rather than dismissed. If you have documentary evidence that TPG’s reported figures are false, that banks actually cancelled the alleged facilities, or that the company is insolvent, publish the documents and numbers.Otherwise, this reads less like analysis and more like an attempt to create fear and selling pressure around a micro-cap stock.Claims require evidence. Allegations are not evidence.
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