Bridge Biotherapeutics (KOSDAQ:288330) Is In A Good Position To Deliver On Growth Plans

Just because a business does not make any money, does not mean that the stock will go down. For example, Bridge Biotherapeutics (KOSDAQ:288330) shareholders have done very well over the last year, with the share price soaring by 132%. 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 Bridge Biotherapeutics' cash burn is. 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). Let's start with an examination of the business' cash, relative to its cash burn.

View our latest analysis for Bridge Biotherapeutics

Does Bridge Biotherapeutics 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 September 2024, Bridge Biotherapeutics had cash of ₩26b and no debt. In the last year, its cash burn was ₩24b. So it had a cash runway of approximately 13 months from September 2024. 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. Depicted below, you can see how its cash holdings have changed over time.

How Is Bridge Biotherapeutics' Cash Burn Changing Over Time?

In our view, Bridge Biotherapeutics doesn't yet produce significant amounts of operating revenue, since it reported just ₩1.1m in the last twelve months. As a result, we think it's a bit early to focus on the revenue growth, so we'll limit ourselves to looking at how the cash burn is changing over time. While it hardly paints a picture of imminent growth, the fact that it has reduced its cash burn by 28% over the last year suggests some degree of prudence. Bridge Biotherapeutics makes us a little nervous due to its lack of substantial operating revenue. We prefer most of the stocks on this list of stocks that analysts expect to grow.

How Easily Can Bridge Biotherapeutics Raise Cash?

Even though it has reduced its cash burn recently, shareholders should still consider how easy it would be for Bridge Biotherapeutics to raise more cash in the future. 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 comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).

Bridge Biotherapeutics' cash burn of ₩24b is about 7.5% of its ₩319b market capitalisation. That's a low proportion, so we figure the company would be able to raise more cash to fund growth, with a little dilution, or even to simply borrow some money.

How Risky Is Bridge Biotherapeutics' Cash Burn Situation?

The good news is that in our view Bridge Biotherapeutics' cash burn situation gives shareholders real reason for optimism. Not only was its cash burn reduction quite good, but its cash burn relative to its market cap was a real positive. Cash burning companies are always on the riskier side of things, but after considering all of the factors discussed in this short piece, we're not too worried about its rate of cash burn. An in-depth examination of risks revealed 5 warning signs for Bridge Biotherapeutics that readers should think about before committing capital to this stock.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies with significant insider holdings, 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.