We're Interested To See How Honey Payment Group (WSE:MAX) Uses Its Cash Hoard To Grow

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. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

So should Honey Payment Group (WSE:MAX) shareholders be worried about its cash burn? 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). We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

Check out our latest analysis for Honey Payment Group

Does Honey Payment Group 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 June 2023, Honey Payment Group had cash of zł1.5m and no debt. In the last year, its cash burn was zł104k. So it had a very long cash runway of many years from June 2023. While this is only one measure of its cash burn situation, it certainly gives us the impression that holders have nothing to worry about. The image below shows how its cash balance has been changing over the last few years.

How Hard Would It Be For Honey Payment Group To Raise More Cash For 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. 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.

Honey Payment Group's cash burn of zł104k is about 0.07% of its zł153m market capitalisation. 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 Honey Payment Group's Cash Burn A Worry?

Because Honey Payment Group is an early stage company, we don't have a great deal of data on which to form an opinion of its cash burn. We would undoubtedly be more comfortable if it had reported some operating revenue. However, it is fair to say that its cash runway gave us comfort. Overall, we think its cash burn seems perfectly reasonable, and we are not concerned by it. On another note, we conducted an in-depth investigation of the company, and identified 5 warning signs for Honey Payment Group (4 don't sit too well with us!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies insiders are buying, 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.