Stock Analysis
HydrogenPro (OB:HYPRO) 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, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.
So, the natural question for HydrogenPro (OB:HYPRO) shareholders is whether they should be concerned by its rate of 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. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.
See our latest analysis for HydrogenPro
When Might HydrogenPro Run Out Of Money?
A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. When HydrogenPro last reported its September 2024 balance sheet in November 2024, it had zero debt and cash worth kr188m. Looking at the last year, the company burnt through kr17m. That means it had a cash runway of very many years as of September 2024. Importantly, though, analysts think that HydrogenPro will reach cashflow breakeven before then. In that case, it may never reach the end of its cash runway. The image below shows how its cash balance has been changing over the last few years.
How Well Is HydrogenPro Growing?
HydrogenPro managed to reduce its cash burn by 94% over the last twelve months, which is extremely promising, when it comes to considering its need for cash. Unfortunately, however, operating revenue dropped 46% during the same time frame. Considering the factors above, the company doesn’t fare badly when it comes to assessing how it is changing over time. 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.
Can HydrogenPro Raise More Cash Easily?
While HydrogenPro seems to be in a decent position, we reckon it is still worth thinking about how easily it could raise more cash, if that proved desirable. 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. 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 kr316m, HydrogenPro's kr17m in cash burn equates to about 5.5% of its market value. 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 HydrogenPro's Cash Burn Situation?
It may already be apparent to you that we're relatively comfortable with the way HydrogenPro is burning through its cash. In particular, we think its cash burn reduction stands out as evidence that the company is well on top of its spending. While we must concede that its falling revenue is a bit worrying, the other factors mentioned in this article provide great comfort when it comes to the cash burn. Shareholders can take heart from the fact that analysts are forecasting it will reach breakeven. 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. Separately, we looked at different risks affecting the company and spotted 4 warning signs for HydrogenPro (of which 2 don't sit too well with us!) 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.
About OB:HYPRO
HydrogenPro
Engages in designing and delivering hydrogen technology and systems in Norway, Europe, the United States, and the Asia Pacific.