We're Not Very Worried About Rolling Optics Holding's (STO:RO) Cash Burn Rate

We can readily understand why investors are attracted to unprofitable companies. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

So, the natural question for Rolling Optics Holding (STO:RO) shareholders is whether they should be concerned by its rate of cash burn. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

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Does Rolling Optics Holding 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. When Rolling Optics Holding last reported its March 2025 balance sheet in April 2025, it had zero debt and cash worth kr49m. In the last year, its cash burn was kr17m. So it had a cash runway of about 2.8 years from March 2025. Arguably, that's a prudent and sensible length of runway to have. The image below shows how its cash balance has been changing over the last few years.

View our latest analysis for Rolling Optics Holding

How Well Is Rolling Optics Holding Growing?

Rolling Optics Holding actually ramped up its cash burn by a whopping 85% in the last year, which shows it is boosting investment in the business. On top of that, the fact that operating revenue was basically flat over the same period compounds the concern. Taken together, we think these growth metrics are a little worrying. In reality, this article only makes a short study of the company's growth data. You can take a look at how Rolling Optics Holding has developed its business over time by checking this visualization of its revenue and earnings history.

How Easily Can Rolling Optics Holding Raise Cash?

Rolling Optics Holding 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. Many companies end up issuing new shares to fund future 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).

Since it has a market capitalisation of kr333m, Rolling Optics Holding's kr17m in cash burn equates to about 5.2% of its market value. Given that is a rather small percentage, it would probably be really easy for the company to fund another year's growth by issuing some new shares to investors, or even by taking out a loan.

So, Should We Worry About Rolling Optics Holding's Cash Burn?

Even though its increasing cash burn makes us a little nervous, we are compelled to mention that we thought Rolling Optics Holding's cash runway was relatively promising. Considering all the factors discussed in this article, we're not overly concerned about the company's cash burn, although we do think shareholders should keep an eye on how it develops. Taking a deeper dive, we've spotted 4 warning signs for Rolling Optics Holding you should be aware of, and 1 of them is potentially serious.

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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.