We're Keeping An Eye On Massivit 3D Printing Technologies' (TLV:MSVT) Cash Burn Rate

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. 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. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

Check out our latest analysis for Massivit 3D Printing Technologies

Does Massivit 3D Printing Technologies Have A Long 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 June 2023, Massivit 3D Printing Technologies had cash of US$23m and no debt. In the last year, its cash burn was US$15m. Therefore, from June 2023 it had roughly 19 months of cash runway. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. Depicted below, you can see how its cash holdings have changed over time.

How Well Is Massivit 3D Printing Technologies Growing?

In the last twelve months, Massivit 3D Printing Technologies kept its cash burn steady. What was not flat was its operating revenue, which gained 59%. We think it is growing rather well, upon reflection. In reality, this article only makes a short study of the company's growth data. 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?

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 has a market capitalisation of US$34m and burnt through US$15m last year, which is 43% of the company's market value. From this perspective, it seems that the company spent a huge amount relative to its market value, and we'd be very wary of a painful capital raising.

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

On this analysis of Massivit 3D Printing Technologies' cash burn, we think its revenue growth was reassuring, while its cash burn relative to its market cap has us a bit worried. Even though we don't think it has a problem with its cash burn, the analysis we've done in this article does suggest that shareholders should give some careful thought to the potential cost of raising more money in the future. On another note, we conducted an in-depth investigation of the company, and identified 2 warning signs for Massivit 3D Printing Technologies (1 shouldn't be ignored!) that you should be aware of before investing here.

Of course Massivit 3D Printing Technologies may not be the best stock to buy. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.