Here's Why We're Not Too Worried About Massivit 3D Printing Technologies' (TLV:MSVT) Cash Burn Situation
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 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. 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, the natural question for Massivit 3D Printing Technologies (TLV:MSVT) shareholders is whether they should be concerned by its rate of cash burn. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.
View our latest analysis for Massivit 3D Printing Technologies
How Long Is Massivit 3D Printing Technologies' 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. Massivit 3D Printing Technologies has such a small amount of debt that we'll set it aside, and focus on the US$46m in cash it held at December 2021. In the last year, its cash burn was US$11m. Therefore, from December 2021 it had 4.4 years of cash runway. There's no doubt that this is a reassuringly long runway. You can see how its cash balance has changed over time in the image below.
How Well Is Massivit 3D Printing Technologies Growing?
Notably, Massivit 3D Printing Technologies actually ramped up its cash burn very hard and fast in the last year, by 179%, signifying heavy investment in the business. Of course, the truly verdant revenue growth of 107% in that time may well justify the growth spend. In light of the data above, we're fairly sanguine about the business growth trajectory. Of course, we've only taken a quick look at the stock's growth metrics, here. This graph of historic revenue growth shows how Massivit 3D Printing Technologies is building its business over time.
How Hard Would It Be For Massivit 3D Printing Technologies To Raise More Cash For Growth?
While Massivit 3D Printing Technologies seems to be in a decent position, we reckon it is still worth thinking about how easily it could raise more cash, if that proved desirable. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. Commonly, a business will sell new shares in itself to raise cash and drive growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.
Since it has a market capitalisation of US$58m, Massivit 3D Printing Technologies' US$11m in cash burn equates to about 18% of its market value. Given that situation, it's fair to say the company wouldn't have much trouble raising more cash for growth, but shareholders would be somewhat diluted.
Is Massivit 3D Printing Technologies' Cash Burn A Worry?
Even though its increasing cash burn makes us a little nervous, we are compelled to mention that we thought Massivit 3D Printing Technologies' revenue growth was relatively promising. Cash burning companies are always on the riskier side of things, but after considering all of the factors discussed in this short piece, we're not too worried about its rate of cash burn. Its important for readers to be cognizant of the risks that can affect the company's operations, and we've picked out 1 warning sign for Massivit 3D Printing Technologies that investors should know when investing in the stock.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies, 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.
About TASE:MSVT
Massivit 3D Printing Technologies
Operates as a provider of industrial 3D printing systems in Italy and internationally.
Moderate with adequate balance sheet.