Companies Like INBIOGEN (KRX:101140) Can Afford To Invest In Growth

We can readily understand why investors are attracted to unprofitable companies. 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 INBIOGEN (KRX:101140) shareholders should be worried about its 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. Let's start with an examination of the business' cash, relative to its cash burn.

See our latest analysis for INBIOGEN

How Long Is INBIOGEN'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. When INBIOGEN last reported its September 2024 balance sheet in November 2024, it had zero debt and cash worth ₩4.5b. Importantly, its cash burn was ₩1.4b over the trailing twelve months. So it had a cash runway of about 3.1 years from September 2024. A runway of this length affords the company the time and space it needs to develop the business. The image below shows how its cash balance has been changing over the last few years.

How Well Is INBIOGEN Growing?

Happily, INBIOGEN is travelling in the right direction when it comes to its cash burn, which is down 84% over the last year. And while hardly exciting, it was still good to see revenue growth of 4.2% during that time. It seems to be growing nicely. In reality, this article only makes a short study of the company's growth data. You can take a look at how INBIOGEN has developed its business over time by checking this visualization of its revenue and earnings history.

How Easily Can INBIOGEN Raise Cash?

We are certainly impressed with the progress INBIOGEN has made over the last year, but it is also worth considering how costly it would be if it wanted to raise more cash to fund faster growth. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. 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.

Since it has a market capitalisation of ₩67b, INBIOGEN's ₩1.4b in cash burn equates to about 2.1% 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.

Is INBIOGEN's Cash Burn A Worry?

It may already be apparent to you that we're relatively comfortable with the way INBIOGEN is burning through its cash. For example, we think its cash runway suggests that the company is on a good path. On this analysis its revenue growth was its weakest feature, but we are not concerned about it. Looking at all the measures in this article, together, we're not worried about its rate of cash burn; the company seems well on top of its medium-term spending needs. On another note, INBIOGEN has 4 warning signs (and 2 which are significant) we think you should know about.

If you would prefer to check out another company with better fundamentals, then do not miss this free list of interesting companies, that have HIGH return on equity and low debt or this list of stocks which are all forecast to grow.

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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.