We're Not Worried About Fly Play hf's (ICE:PLAY) Cash Burn

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. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

So should Fly Play hf (ICE:PLAY) 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. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

See our latest analysis for Fly Play hf

How Long Is Fly Play hf's Cash Runway?

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. As at March 2023, Fly Play hf had cash of US$31m and no debt. In the last year, its cash burn was US$7.8m. So it had a cash runway of about 4.0 years from March 2023. There's no doubt that this is a reassuringly long runway. Depicted below, you can see how its cash holdings have changed over time.

How Is Fly Play hf's Cash Burn Changing Over Time?

In our view, Fly Play hf doesn't yet produce significant amounts of operating revenue, since it reported just US$163m in the last twelve months. Therefore, for the purposes of this analysis we'll focus on how the cash burn is tracking. Notably, its cash burn was actually down by 64% in the last year, which is a real positive in terms of resilience, but uninspiring when it comes to investment for growth. In reality, this article only makes a short study of the company's growth data. You can take a look at how Fly Play hf is growing revenue over time by checking this visualization of past revenue growth.

How Easily Can Fly Play hf Raise Cash?

There's no doubt Fly Play hf's rapidly reducing cash burn brings comfort, but even if it's only hypothetical, it's always worth asking how easily it could raise more money to fund further growth. Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive 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.

Fly Play hf has a market capitalisation of US$74m and burnt through US$7.8m last year, which is 11% 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 Fly Play hf's Cash Burn Situation?

It may already be apparent to you that we're relatively comfortable with the way Fly Play hf is burning through its cash. For example, we think its cash runway suggests that the company is on a good path. Its cash burn relative to its market cap wasn't quite as good, but was still rather encouraging! After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash. On another note, we conducted an in-depth investigation of the company, and identified 3 warning signs for Fly Play hf (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 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.