We're Not Very Worried About Doosan Robotics' (KRX:454910) Cash Burn Rate

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?

So, the natural question for Doosan Robotics (KRX:454910) shareholders is whether they should be concerned by its rate of 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). The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

See our latest analysis for Doosan Robotics

Does Doosan Robotics 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. In September 2024, Doosan Robotics had ₩294b in cash, and was debt-free. Importantly, its cash burn was ₩50b over the trailing twelve months. That means it had a cash runway of about 5.9 years as of September 2024. While this is only one measure of its cash burn situation, it certainly gives us the impression that holders have nothing to worry about. However, if we extrapolate the company's recent cash burn trend, then it would have a longer cash run way. You can see how its cash balance has changed over time in the image below.

How Well Is Doosan Robotics Growing?

Doosan Robotics actually ramped up its cash burn by a whopping 75% in the last year, which shows it is boosting investment in the business. That does give us pause, and we can't take much solace in the operating revenue growth of 3.7% in the same time frame. Taken together, we think these growth metrics are a little worrying. While the past is always worth studying, it is the future that matters most of all. So you might want to take a peek at how much the company is expected to grow in the next few years.

How Easily Can Doosan Robotics Raise Cash?

Even though it seems like Doosan Robotics is developing its business nicely, we still like to consider how easily it could raise more money to accelerate growth. Companies can raise capital through either debt or equity. 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.

Since it has a market capitalisation of ₩4.2t, Doosan Robotics' ₩50b in cash burn equates to about 1.2% of its market value. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.

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. For example, we think its cash runway suggests that the company is on a good path. While its increasing cash burn wasn't great, the other factors mentioned in this article more than make up for weakness on that measure. 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. Its important for readers to be cognizant of the risks that can affect the company's operations, and we've picked out 1 warning sign for Doosan Robotics that investors should know when investing in the stock.

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.