We Think Saudi Industrial Export (TADAWUL:4140) Can Easily Afford To Drive Business Growth

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 while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

So should Saudi Industrial Export (TADAWUL:4140) 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.

See our latest analysis for Saudi Industrial Export

How Long Is Saudi Industrial Export's 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. When Saudi Industrial Export last reported its balance sheet in June 2022, it had zero debt and cash worth ر.س165m. Looking at the last year, the company burnt through ر.س8.5m. So it had a very long cash runway of many years from June 2022. Even though this is but one measure of the company's cash burn, the thought of such a long cash runway warms our bellies in a comforting way. The image below shows how its cash balance has been changing over the last few years.

Can Saudi Industrial Export Raise More Cash Easily?

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.

Saudi Industrial Export's cash burn of ر.س8.5m is about 9.5% of its ر.س89m market capitalisation. 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 Saudi Industrial Export's Cash Burn Situation?

Given it's an early stage company, we don't have a lot of data with which to judge Saudi Industrial Export's cash burn. Having said that, we can say that its cash runway was a real positive. Overall, we think its cash burn seems perfectly reasonable, and we are not concerned by it. Separately, we looked at different risks affecting the company and spotted 3 warning signs for Saudi Industrial Export (of which 2 shouldn't be ignored!) you should know about.

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.