We Think New Provenance Everlasting Holdings (HKG:2326) Needs To Drive Business Growth Carefully

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, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. 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 New Provenance Everlasting Holdings (HKG:2326) shareholders should be worried about its cash burn. For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

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How Long Is New Provenance Everlasting Holdings' Cash Runway?

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 March 2025, New Provenance Everlasting Holdings had cash of HK$3.1m and no debt. Looking at the last year, the company burnt through HK$3.5m. That means it had a cash runway of around 11 months as of March 2025. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. You can see how its cash balance has changed over time in the image below.

Check out our latest analysis for New Provenance Everlasting Holdings

How Well Is New Provenance Everlasting Holdings Growing?

One thing for shareholders to keep front in mind is that New Provenance Everlasting Holdings increased its cash burn by 400% in the last twelve months. While that's concerning on it's own, the fact that operating revenue was actually down 46% over the same period makes us positively tremulous. Considering these two factors together makes us nervous about the direction the company seems to be heading. Of course, we've only taken a quick look at the stock's growth metrics, here. You can take a look at how New Provenance Everlasting Holdings has developed its business over time by checking this visualization of its revenue and earnings history.

Can New Provenance Everlasting Holdings Raise More Cash Easily?

New Provenance Everlasting Holdings revenue is declining and its cash burn is increasing, so many may be considering its need to raise more cash in the future. 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. 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).

Since it has a market capitalisation of HK$232m, New Provenance Everlasting Holdings' HK$3.5m in cash burn equates to about 1.5% of its 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.

Is New Provenance Everlasting Holdings' Cash Burn A Worry?

On this analysis of New Provenance Everlasting Holdings' cash burn, we think its cash burn relative to its market cap was reassuring, while its increasing cash burn has us a bit worried. 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 3 warning signs for New Provenance Everlasting Holdings you should be aware of, and 1 of them is potentially serious.

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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.