Here's Why We're Not Too Worried About CAP-XX's (LON:CPX) Cash Burn Situation

There's no doubt that money can be made by owning shares of unprofitable businesses. Indeed, CAP-XX (LON:CPX) stock is up 104% in the last year, providing strong gains for shareholders. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.

So notwithstanding the buoyant share price, we think it's well worth asking whether CAP-XX's cash burn is too risky. 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. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

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Does CAP-XX Have A Long Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When CAP-XX last reported its June 2025 balance sheet in November 2025, it had zero debt and cash worth AU$4.0m. Looking at the last year, the company burnt through AU$2.5m. That means it had a cash runway of around 19 months as of June 2025. 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.

View our latest analysis for CAP-XX

How Well Is CAP-XX Growing?

It was fairly positive to see that CAP-XX reduced its cash burn by 37% during the last year. And operating revenue was up by 7.5% too. On balance, we'd say the company is improving over time. In reality, this article only makes a short study of the company's growth data. You can take a look at how CAP-XX has developed its business over time by checking this visualization of its revenue and earnings history.

How Easily Can CAP-XX Raise Cash?

CAP-XX seems to be in a fairly good position, in terms of cash burn, but we still think it's worthwhile considering how easily it could raise more money if it wanted to. Companies can raise capital through either debt or equity. 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.

CAP-XX's cash burn of AU$2.5m is about 7.7% of its AU$33m market capitalisation. 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.

Is CAP-XX's Cash Burn A Worry?

The good news is that in our view CAP-XX's cash burn situation gives shareholders real reason for optimism. Not only was its cash burn reduction quite good, but its cash burn relative to its market cap was a real positive. Cash burning companies are always on the riskier side of things, but after considering all of the factors discussed in this short piece, we're not too worried about its rate of cash burn. On another note, CAP-XX has 5 warning signs (and 2 which are concerning) we think you should know about.

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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.