Does J & B. Ladenis Bros SA MINERVA Knitwear Manufacturing Company (ATH:MIN) Have Enough Money Left To Grow?

Trailing twelve-month data shows us that J & B. Ladenis Bros SA MINERVA Knitwear Manufacturing Company’s (ATSE:MIN) earnings loss has accumulated to -€244.00K. Although some investors expected this, their belief in the path to profitability for J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing may be wavering. A crucial question to bear in mind when you’re an investor of an unprofitable business, is whether the company will have to raise more capital in the near future. 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. J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing 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 J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing

What is cash burn?

J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing’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 -€369.00K, J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing is chipping away at its €119.00K cash reserves in order to run its business. The measure of how fast J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing goes through its cash reserves over time is called the cash burn rate. Companies with high cash burn rates can eventually turn into ashes, which makes it the biggest risk an investor in loss-making companies face. J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing operates in the apparel, accessories and luxury goods industry, which on average generates a positive earnings per share, meaning the majority of its peers are profitable. J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing faces the trade-off between running the risk of depleting its cash reserves too fast, or risk falling behind its profitable competitors by investing too slowly.

ATSE:MIN Income Statement May 16th 18
ATSE:MIN Income Statement May 16th 18

When will J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing need to raise more cash?

J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing has to pay its employees and other necessities such as rent and admin costs in order to keep its business running. These costs are called operational expenses, which is sometimes shortened to opex. In this calculation I’ve only included recurring sales, general and admin (SG&A) expenses, and R&D expenses occured within they year. In J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing’s case, its opex fell by 3.20% last year, which may signal the company moving towards a more sustainable level of expenses. However, even with declining costs, the current level of cash is not enough to sustain J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing’s operations and the company may need to come to market to raise more capital within the year. Even though this is analysis is fairly basic, and J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing still can cut its overhead further, or raise debt capital instead of coming to equity markets, the outcome of this analysis still helps us understand how sustainable the J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing’s operation is, and when things may have to change.

Next Steps:

Loss-making companies are a risky play, even those that are reducing their opex over time. Though, this shouldn’t discourage you from considering entering the stock in the future. The outcome of my analysis suggests that even if the company maintains this negative rate of opex growth, it will run out of cash within the year. The potential equity raising resulting from this means you could potentially get a better deal on the share price when the company raises capital next. This is only a rough assessment of financial health, and I’m sure MIN has company-specific issues impacting its cash management decisions. I recommend you continue to research J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing to get a better picture of the company by looking at:
  1. Historical Performance: What has MIN’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 J. & B. Ladenis Bros SA MINERVA Knitwear Manufacturing’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 June 2017. This may not be consistent with full year annual report figures. Operating expenses include only SG&A and one-year R&D.