Here's Why We're Not Too Worried About Themis G.R.E.N's (TLV:TMIS) Cash Burn Situation

There's no doubt that money can be made by owning shares of unprofitable businesses. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. 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 Themis G.R.E.N (TLV:TMIS) shareholders is whether they should be concerned by its rate of cash burn. For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

See our latest analysis for Themis G.R.E.N

Does Themis G.R.E.N Have A Long Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. In June 2022, Themis G.R.E.N had ₪14m in cash, and was debt-free. Importantly, its cash burn was ₪8.7m over the trailing twelve months. That means it had a cash runway of around 19 months as of June 2022. That's not too bad, but it's fair to say the end of the cash runway is in sight, unless cash burn reduces drastically. Depicted below, you can see how its cash holdings have changed over time.

How Hard Would It Be For Themis G.R.E.N To Raise More Cash For 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.

Themis G.R.E.N's cash burn of ₪8.7m is about 12% of its ₪73m market capitalisation. As a result, we'd venture that the company could raise more cash for growth without much trouble, albeit at the cost of some dilution.

Is Themis G.R.E.N's Cash Burn A Worry?

Given it's an early stage company, we don't have a lot of data with which to judge Themis G.R.E.N's cash burn. And it is worth keeping in mind that early stage companies are generally more risky than well established ones. To be frank most cash burning companies are relatively risky, but this one seems safer than most, in our view. On another note, we conducted an in-depth investigation of the company, and identified 5 warning signs for Themis G.R.E.N (3 don't sit too well with us!) 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.