We're Interested To See How Saudi Industrial Export (TADAWUL:4140) Uses Its Cash Hoard To Grow

Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. 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 the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.

So, the natural question for Saudi Industrial Export (TADAWUL:4140) shareholders is whether they should be concerned by its rate of cash burn. In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

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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 September 2024 balance sheet in November 2024, it had zero debt and cash worth ر.س127m. In the last year, its cash burn was ر.س18m. That means it had a cash runway of about 6.9 years as of September 2024. While this is only one measure of its cash burn situation, it certainly gives us the impression that holders have nothing to worry about. Depicted below, you can see how its cash holdings have changed over time.

See our latest analysis for Saudi Industrial Export

How Well Is Saudi Industrial Export Growing?

It was fairly positive to see that Saudi Industrial Export reduced its cash burn by 33% during the last year. Having said that, the revenue growth of 86% was considerably more inspiring. We think it is growing rather well, upon reflection. Of course, we've only taken a quick look at the stock's growth metrics, here. You can take a look at how Saudi Industrial Export is growing revenue over time by checking this visualization of past revenue growth .

How Easily Can Saudi Industrial Export Raise Cash?

We are certainly impressed with the progress Saudi Industrial Export has made over the last year, but it is also worth considering how costly it would be if it wanted to raise more cash to fund 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. Commonly, a business will sell new shares in itself to raise cash and drive growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).

Saudi Industrial Export's cash burn of ر.س18m is about 4.1% of its ر.س447m 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.

So, Should We Worry About Saudi Industrial Export's Cash Burn?

It may already be apparent to you that we're relatively comfortable with the way Saudi Industrial Export is burning through its cash. For example, we think its revenue growth suggests that the company is on a good path. And even though its cash burn reduction wasn't quite as impressive, it was still a positive. After considering a range of factors in this article, we're pretty relaxed about its cash burn, since the company seems to be in a good position to continue to fund its growth. Its important for readers to be cognizant of the risks that can affect the company's operations, and we've picked out 1 warning sign for Saudi Industrial Export that investors should know when investing in the 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.