Here's Why We're Not Too Worried About Captor Therapeutics Spolka Akcyjna's (WSE:CTX) Cash Burn Situation

We can readily understand why investors are attracted to unprofitable companies. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

So should Captor Therapeutics Spolka Akcyjna (WSE:CTX) 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). First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

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Does Captor Therapeutics Spolka Akcyjna Have A Long Cash Runway?

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. In September 2024, Captor Therapeutics Spolka Akcyjna had zł49m in cash, and was debt-free. Looking at the last year, the company burnt through zł41m. So it had a cash runway of approximately 14 months from September 2024. Importantly, analysts think that Captor Therapeutics Spolka Akcyjna will reach cashflow breakeven in 2 years. That means unless the company reduces its cash burn quickly, it may well look to raise more cash. The image below shows how its cash balance has been changing over the last few years.

View our latest analysis for Captor Therapeutics Spolka Akcyjna

How Well Is Captor Therapeutics Spolka Akcyjna Growing?

At first glance it's a bit worrying to see that Captor Therapeutics Spolka Akcyjna actually boosted its cash burn by 3.1%, year on year. But looking on the bright side, its revenue gained by 54%, lending some credence to the growth narrative. The company needs to keep up that growth, if it is to really please shareholders. We think it is growing rather well, upon reflection. Clearly, however, the crucial factor is whether the company will grow its business going forward. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

How Easily Can Captor Therapeutics Spolka Akcyjna Raise Cash?

Captor Therapeutics Spolka Akcyjna seems to be in a fairly good position, in terms of cash burn, but we still think it's worthwhile considering how easily it could raise more money if it wanted to. 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.

Captor Therapeutics Spolka Akcyjna has a market capitalisation of zł173m and burnt through zł41m last year, which is 24% of the company's market value. That's fairly notable cash burn, so if the company had to sell shares to cover the cost of another year's operations, shareholders would suffer some costly dilution.

So, Should We Worry About Captor Therapeutics Spolka Akcyjna's Cash Burn?

Even though its cash burn relative to its market cap makes us a little nervous, we are compelled to mention that we thought Captor Therapeutics Spolka Akcyjna's revenue growth was relatively promising. Shareholders can take heart from the fact that analysts are forecasting it will reach breakeven. Based on the factors mentioned in this article, we think its cash burn situation warrants some attention from shareholders, but we don't think they should be worried. Readers need to have a sound understanding of business risks before investing in a stock, and we've spotted 2 warning signs for Captor Therapeutics Spolka Akcyjna 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.