We're Hopeful That Zhejiang Taimei Medical Technology (HKG:2576) Will Use Its Cash Wisely

There's no doubt that money can be made by owning shares of unprofitable businesses. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

So, the natural question for Zhejiang Taimei Medical Technology (HKG:2576) shareholders is whether they should be concerned by its rate of 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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Does Zhejiang Taimei Medical Technology Have A Long Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. As at June 2025, Zhejiang Taimei Medical Technology had cash of CN¥1.1b and no debt. In the last year, its cash burn was CN¥123m. That means it had a cash runway of about 9.4 years as of June 2025. 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.

See our latest analysis for Zhejiang Taimei Medical Technology

How Well Is Zhejiang Taimei Medical Technology Growing?

Happily, Zhejiang Taimei Medical Technology is travelling in the right direction when it comes to its cash burn, which is down 56% over the last year. Unfortunately, however, operating revenue dropped 9.3% during the same time frame. Considering the factors above, the company doesn’t fare badly when it comes to assessing how it is changing over time. Of course, we've only taken a quick look at the stock's growth metrics, here. This graph of historic earnings and revenue shows how Zhejiang Taimei Medical Technology is building its business over time.

How Hard Would It Be For Zhejiang Taimei Medical Technology To Raise More Cash For Growth?

We are certainly impressed with the progress Zhejiang Taimei Medical Technology has made over the last year, but it is also worth considering how costly it would be if it wanted to raise more cash to fund faster growth. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. 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.

Zhejiang Taimei Medical Technology has a market capitalisation of CN¥2.5b and burnt through CN¥123m last year, which is 4.9% of the company's market value. 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.

How Risky Is Zhejiang Taimei Medical Technology's Cash Burn Situation?

As you can probably tell by now, we're not too worried about Zhejiang Taimei Medical Technology's cash burn. In particular, we think its cash runway stands out as evidence that the company is well on top of its spending. While its falling revenue wasn't great, the other factors mentioned in this article more than make up for weakness on that measure. Looking at all the measures in this article, together, we're not worried about its rate of cash burn; the company seems well on top of its medium-term spending needs. We think it's very important to consider the cash burn for loss making companies, but other considerations such as the amount the CEO is paid can also enhance your understanding of the business. You can click here to see what Zhejiang Taimei Medical Technology's CEO gets paid each year.

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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.