We Think Captor Therapeutics Spolka Akcyjna (WSE:CTX) Can Afford To Drive Business Growth

There's no doubt that money can be made by owning shares of unprofitable businesses. 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 while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

So should Captor Therapeutics Spolka Akcyjna (WSE:CTX) shareholders be worried about its 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. Let's start with an examination of the business' cash, relative to its cash burn.

Check out our latest analysis for Captor Therapeutics Spolka Akcyjna

When Might Captor Therapeutics Spolka Akcyjna Run Out Of Money?

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. When Captor Therapeutics Spolka Akcyjna last reported its September 2023 balance sheet in November 2023, it had zero debt and cash worth zł55m. Importantly, its cash burn was zł40m over the trailing twelve months. Therefore, from September 2023 it had roughly 16 months of cash runway. 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. Depicted below, you can see how its cash holdings have changed over time.

How Well Is Captor Therapeutics Spolka Akcyjna Growing?

Some investors might find it troubling that Captor Therapeutics Spolka Akcyjna is actually increasing its cash burn, which is up 25% in the last year. Given that its operating revenue increased 172% in that time, it seems the company has reason to think its expenditure is working well to drive growth. If revenue is maintained once spending on growth decreases, that could well pay off! It seems to be growing nicely. While the past is always worth studying, it is the future that matters most of all. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

Can Captor Therapeutics Spolka Akcyjna Raise More Cash Easily?

While Captor Therapeutics Spolka Akcyjna seems to be in a fairly good position, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Many companies end up issuing new shares to fund future 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.

Captor Therapeutics Spolka Akcyjna has a market capitalisation of zł373m and burnt through zł40m last year, which is 11% of the company's market value. As a result, we'd venture that the company could raise more cash for growth without much trouble, albeit at the cost of some dilution.

How Risky Is Captor Therapeutics Spolka Akcyjna's Cash Burn Situation?

It may already be apparent to you that we're relatively comfortable with the way Captor Therapeutics Spolka Akcyjna is burning through its cash. In particular, we think its revenue growth stands out as evidence that the company is well on top of its spending. Although its increasing cash burn does give us reason for pause, the other metrics we discussed in this article form a positive picture overall. One real positive is that analysts are forecasting that the company 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. Its important for readers to be cognizant of the risks that can affect the company's operations, and we've picked out 3 warning signs for Captor Therapeutics Spolka Akcyjna that investors should know when investing in the stock.

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