Here's Why We're Not At All Concerned With Doosan Robotics' (KRX:454910) Cash Burn Situation

Just because a business does not make any money, does not mean that the stock will go down. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

Given this risk, we thought we'd take a look at whether Doosan Robotics (KRX:454910) shareholders should be worried about its cash burn. For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

View our latest analysis for Doosan Robotics

Does Doosan Robotics Have A Long 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 December 2023, Doosan Robotics had cash of ₩382b and no debt. Looking at the last year, the company burnt through ₩36b. So it had a very long cash runway of many years from December 2023. While this is only one measure of its cash burn situation, it certainly gives us the impression that holders have nothing to worry about. Depicted below, you can see how its cash holdings have changed over time.

Is Doosan Robotics' Revenue Growing?

We don't yet have enough data to look at the trend in Doosan Robotics' cash burn, so operating revenue growth is arguably the best measure of growth we have, right now. Although it's hardly brilliant growth, it's good to see the company grew revenue by 17% in the last year. Clearly, however, the crucial factor is whether the company will grow its business going forward. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

How Easily Can Doosan Robotics Raise Cash?

While Doosan Robotics is showing solid revenue growth, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. 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.

Doosan Robotics has a market capitalisation of ₩5.8t and burnt through ₩36b last year, which is 0.6% of the company's market value. So it could almost certainly just borrow a little to fund another year's growth, or else easily raise the cash by issuing a few shares.

How Risky Is Doosan Robotics' Cash Burn Situation?

It may already be apparent to you that we're relatively comfortable with the way Doosan Robotics is burning through its cash. In particular, we think its cash runway stands out as evidence that the company is well on top of its spending. Its revenue growth wasn't quite as good, but was still rather encouraging! After considering a range of factors in this article, we're pretty relaxed about its cash burn, since the company seems to be in a good position to continue to fund its growth. While we always like to monitor cash burn for early stage companies, qualitative factors such as the CEO pay can also shed light on the situation. Click here to see free what the Doosan Robotics CEO is paid..

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.