Here's Why We're Not Too Worried About Quicklizard's (TLV:QLRD) Cash Burn Situation

There's no doubt that money can be made by owning shares of unprofitable businesses. For example, Quicklizard (TLV:QLRD) shareholders have done very well over the last year, with the share price soaring by 104%. 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.

In light of its strong share price run, we think now is a good time to investigate how risky Quicklizard's cash burn is. 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.

View our latest analysis for Quicklizard

When Might Quicklizard Run Out Of Money?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When Quicklizard last reported its balance sheet in June 2023, it had zero debt and cash worth ₪22m. Importantly, its cash burn was ₪11m over the trailing twelve months. Therefore, from June 2023 it had roughly 23 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. You can see how its cash balance has changed over time in the image below.

How Well Is Quicklizard Growing?

We reckon the fact that Quicklizard managed to shrink its cash burn by 43% over the last year is rather encouraging. Having said that, the revenue growth of 57% was considerably more inspiring. We think it is growing rather well, upon reflection. Of course, we've only taken a quick look at the stock's growth metrics, here. This graph of historic revenue growth shows how Quicklizard is building its business over time.

How Hard Would It Be For Quicklizard To Raise More Cash For Growth?

While Quicklizard 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. Many companies end up issuing new shares to fund future 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.

Quicklizard has a market capitalisation of ₪80m and burnt through ₪11m last year, which is 14% of the company's market value. 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.

How Risky Is Quicklizard's Cash Burn Situation?

It may already be apparent to you that we're relatively comfortable with the way Quicklizard is burning through its cash. In particular, we think its revenue growth stands out as evidence that the company is well on top of its spending. And even though its cash burn relative to its market cap wasn't quite as impressive, it was still a positive. 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 4 warning signs for Quicklizard (1 is 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.