We're Interested To See How Curiox Biosystems (KOSDAQ:445680) Uses Its Cash Hoard To Grow

We can readily understand why investors are attracted to unprofitable companies. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

Given this risk, we thought we'd take a look at whether Curiox Biosystems (KOSDAQ:445680) shareholders should be worried about its cash burn. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

See our latest analysis for Curiox Biosystems

Does Curiox Biosystems Have A Long Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. In September 2023, Curiox Biosystems had ₩20b in cash, and was debt-free. Looking at the last year, the company burnt through ₩6.8b. That means it had a cash runway of about 3.0 years as of September 2023. That's decent, giving the company a couple years to develop its business. You can see how its cash balance has changed over time in the image below.

Is Curiox Biosystems' Revenue Growing?

Since we don't have data on Curiox Biosystems' cash burn last year, we'll focus on its revenue as measure of growth. As it happens, operating revenue has been pretty flat over the last year. In reality, this article only makes a short study of the company's growth data. This graph of historic earnings and revenue shows how Curiox Biosystems is building its business over time.

How Hard Would It Be For Curiox Biosystems To Raise More Cash For Growth?

Notwithstanding Curiox Biosystems' revenue growth, it is still important to consider how it could raise more money, if it needs to. Companies can raise capital through either debt or equity. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund 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).

Since it has a market capitalisation of ₩288b, Curiox Biosystems' ₩6.8b in cash burn equates to about 2.4% of its 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.

Is Curiox Biosystems' Cash Burn A Worry?

It may already be apparent to you that we're relatively comfortable with the way Curiox Biosystems is burning through its cash. For example, we think its cash runway suggests that the company is on a good path. While its falling revenue wasn't great, the other factors mentioned in this article more than make up for weakness on that measure. 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. Taking a deeper dive, we've spotted 2 warning signs for Curiox Biosystems you should be aware of, and 1 of them can't be ignored.

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.