Does Ynvisible Interactive Inc (CVE:YNV) Have Enough Money Left To Grow?

Ynvisible Interactive Inc (TSXV:YNV) continues its loss-making streak, announcing negative earnings for its latest financial year ending. The single most important question to ask when you’re investing in a loss-making company is – will they need to raise cash again, and if so, when? Cash is crucial to run a business, and if a company burns through its reserves fast, it will need to come back to market for additional capital raising. This may not always be on their own terms, which could hurt current shareholders if the new deal lowers the value of their shares. Ynvisible Interactive may need to come to market again, but the question is, when? Below, I’ve analysed the most recent financial data to help answer this question. Check out our latest analysis for Ynvisible Interactive

What is cash burn?

Ynvisible Interactive’s expenses are currently higher than the money it makes from its day-to-day operations, which means it is funding its overhead with equity capital a.k.a. its cash. With a negative operating cash flow of -€152.99K, Ynvisible Interactive is chipping away at its cash reserves in order to run its business. The measure of how fast Ynvisible Interactive goes through its cash reserves over time is called the cash burn rate. The riskiest factor facing investors of the company is the potential for the company to run out of cash without the ability to raise more money, i.e. the company goes out of business. Not surprisingly, it is more common to find unprofitable companies in the high-growth tech industry. These companies face the trade-off between running the risk of depleting its cash reserves too fast, or the risk of falling behind competition on innovation and gaining market share by investing too slowly.

TSXV:YNV Income Statement Mar 6th 18
TSXV:YNV Income Statement Mar 6th 18

When will Ynvisible Interactive need to raise more cash?

Opex, or operational expenses, are the necessary costs Ynvisible Interactive must pay to keep the business running every day. For the purpose of this calculation I’ve only accounted for sales, general and admin (SG&A) expenses, and R&D expenses incurred within this year. Opex (excluding one-offs) grew by 8.99% over the past year, which is fairly normal for a small-cap. Not surprisingly, if Ynvisible Interactive continues to ramp up expenditure at this rate for the upcoming year, it’ll likely need to come to market within the next few months, given the its current level of cash reserves. This is also the case if Ynvisible Interactive maintains its opex level of €369.13K, without growth, going forward. Although this is a relatively simplistic calculation, and Ynvisible Interactive may reduce its costs or raise debt capital instead of coming to equity markets, the analysis still helps us understand how sustainable the Ynvisible Interactive’s operation is, and when things may have to change.

Next Steps:

The risks involved in investing in loss-making Ynvisible Interactive means you should think twice before diving into the stock. However, this should not prevent you from further researching it as an investment potential. The outcome of my analysis suggests that if the company maintains the rate of opex growth, it will run out of cash within the year. An opportunity may exist for you to enter into the stock at an attractive price, should Ynvisible Interactive come to market to fund its operations. This is only a rough assessment of financial health, and I’m sure YNV has company-specific issues impacting its cash management decisions. You should continue to research Ynvisible Interactive to get a better picture of the company by looking at:
  1. Historical Performance: What has YNV’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Ynvisible Interactive’s board and the CEO’s back ground.
  3. Other High-Performing Stocks: If you believe you should cushion your portfolio with something less risky, scroll through our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 September 2017. This may not be consistent with full year annual report figures. Operating expenses include only SG&A and one-year R&D.