Here's Why We're Not Too Worried About Massivit 3D Printing Technologies' (TLV:MSVT) Cash Burn Situation

Just because a business does not make any money, does not mean that the stock will go down. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

So should Massivit 3D Printing Technologies (TLV:MSVT) shareholders be worried about its cash burn? 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. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

View our latest analysis for Massivit 3D Printing Technologies

When Might Massivit 3D Printing Technologies Run Out Of Money?

A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. In June 2021, Massivit 3D Printing Technologies had US$53m in cash, and was debt-free. Importantly, its cash burn was US$5.3m over the trailing twelve months. So it had a cash runway of about 9.9 years from June 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. Depicted below, you can see how its cash holdings have changed over time.

How Well Is Massivit 3D Printing Technologies Growing?

Massivit 3D Printing Technologies boosted investment sharply in the last year, with cash burn ramping by 52%. While that's concerning on it's own, the fact that operating revenue was actually down 31% over the same period makes us positively tremulous. Considering both these metrics, we're a little concerned about how the company is developing. In reality, this article only makes a short study of the company's growth data. This graph of historic earnings and revenue shows how Massivit 3D Printing Technologies is building its business over time.

Can Massivit 3D Printing Technologies Raise More Cash Easily?

Even though it seems like Massivit 3D Printing Technologies is developing its business nicely, we still like to consider how easily it could raise more money to accelerate 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. 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).

Massivit 3D Printing Technologies' cash burn of US$5.3m is about 5.3% of its US$100m 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.

How Risky Is Massivit 3D Printing Technologies' Cash Burn Situation?

Even though its falling revenue makes us a little nervous, we are compelled to mention that we thought Massivit 3D Printing Technologies' cash runway was relatively promising. Considering all the factors discussed in this article, we're not overly concerned about the company's cash burn, although we do think shareholders should keep an eye on how it develops. On another note, we conducted an in-depth investigation of the company, and identified 2 warning signs for Massivit 3D Printing Technologies (1 is a bit concerning!) that you should be aware of before investing here.

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.