Here's Why We're Not Too Worried About Sungwoo Electronics' (KOSDAQ:081580) Cash Burn Situation

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.

So should Sungwoo Electronics (KOSDAQ:081580) shareholders be worried about its cash burn? In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

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How Long Is Sungwoo Electronics' Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When Sungwoo Electronics last reported its March 2025 balance sheet in May 2025, it had zero debt and cash worth ₩23b. In the last year, its cash burn was ₩6.3b. Therefore, from March 2025 it had 3.7 years of cash runway. 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.

Check out our latest analysis for Sungwoo Electronics

Is Sungwoo Electronics' Revenue Growing?

We're hesitant to extrapolate on the recent trend to assess its cash burn, because Sungwoo Electronics actually had positive free cash flow last year, so operating revenue growth is probably our best bet to measure, right now. While it's not that amazing, we still think that the 15% increase in revenue from operations was a positive. In reality, this article only makes a short study of the company's growth data. This graph of historic earnings and revenue shows how Sungwoo Electronics is building its business over time.

How Easily Can Sungwoo Electronics Raise Cash?

While Sungwoo Electronics is showing solid revenue growth, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive 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.

Sungwoo Electronics has a market capitalisation of ₩43b and burnt through ₩6.3b last year, which is 15% of the company's market value. Given that situation, it's fair to say the company wouldn't have much trouble raising more cash for growth, but shareholders would be somewhat diluted.

Is Sungwoo Electronics' Cash Burn A Worry?

As you can probably tell by now, we're not too worried about Sungwoo Electronics' cash burn. For example, we think its cash runway suggests that the company is on a good path. And even though its cash burn relative to its market cap wasn't quite as impressive, it was still a positive. After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash, as it seems on track to meet its needs over the medium term. Readers need to have a sound understanding of business risks before investing in a stock, and we've spotted 1 warning sign for Sungwoo Electronics that potential shareholders should take into account before putting money into a stock.

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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.