We Think Integrated Waste Solutions Group Holdings (HKG:923) Can Afford To Drive Business Growth

There's no doubt that money can be made by owning shares of unprofitable businesses. 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. 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 should Integrated Waste Solutions Group Holdings (HKG:923) shareholders be worried about its cash burn? In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

See our latest analysis for Integrated Waste Solutions Group Holdings

How Long Is Integrated Waste Solutions Group Holdings' Cash Runway?

A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. As at September 2021, Integrated Waste Solutions Group Holdings had cash of HK$87m and no debt. Looking at the last year, the company burnt through HK$7.6m. That means it had a cash runway of very many years as of September 2021. While this is only one measure of its cash burn situation, it certainly gives us the impression that holders have nothing to worry about. You can see how its cash balance has changed over time in the image below.

How Well Is Integrated Waste Solutions Group Holdings Growing?

We reckon the fact that Integrated Waste Solutions Group Holdings managed to shrink its cash burn by 26% over the last year is rather encouraging. But the revenue dip of 36% in the same period was a bit concerning. Considering both these factors, we're not particularly excited by its growth profile. In reality, this article only makes a short study of the company's growth data. You can take a look at how Integrated Waste Solutions Group Holdings has developed its business over time by checking this visualization of its revenue and earnings history.

How Hard Would It Be For Integrated Waste Solutions Group Holdings To Raise More Cash For Growth?

While Integrated Waste Solutions Group Holdings seems to be in a fairly good position, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. 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.

Integrated Waste Solutions Group Holdings has a market capitalisation of HK$241m and burnt through HK$7.6m last year, which is 3.2% of the company's market value. Given that is a rather small percentage, it would probably be really easy for the company to fund another year's growth by issuing some new shares to investors, or even by taking out a loan.

Is Integrated Waste Solutions Group Holdings' Cash Burn A Worry?

As you can probably tell by now, we're not too worried about Integrated Waste Solutions Group Holdings' cash burn. For example, we think its cash runway suggests that the company is on a good path. Although we do find its falling revenue to be a bit of a negative, once we consider the other metrics mentioned in this article together, the overall picture is one we are comfortable with. Based on the factors mentioned in this article, we think its cash burn situation warrants some attention from shareholders, but we don't think they should be worried. Taking an in-depth view of risks, we've identified 1 warning sign for Integrated Waste Solutions Group Holdings that you should be aware of before investing.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies insiders are buying, and this list of stocks growth stocks (according to analyst forecasts)

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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.