We're Hopeful That BIMobject (STO:BIM) Will Use Its Cash Wisely

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. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

So should BIMobject (STO:BIM) shareholders be worried about its 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'.

See our latest analysis for BIMobject

When Might BIMobject Run Out Of Money?

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. As at September 2023, BIMobject had cash of kr232m and such minimal debt that we can ignore it for the purposes of this analysis. In the last year, its cash burn was kr35m. So it had a cash runway of about 6.6 years from September 2023. 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. Depicted below, you can see how its cash holdings have changed over time.

How Well Is BIMobject Growing?

We reckon the fact that BIMobject managed to shrink its cash burn by 48% over the last year is rather encouraging. Revenue also improved during the period, increasing by 18%. We think it is growing rather well, upon reflection. In reality, this article only makes a short study of the company's growth data. This graph of historic earnings and revenue shows how BIMobject is building its business over time.

Can BIMobject Raise More Cash Easily?

We are certainly impressed with the progress BIMobject 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. Many companies end up issuing new shares to fund future 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.

BIMobject has a market capitalisation of kr561m and burnt through kr35m last year, which is 6.3% of the company's market value. 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.

Is BIMobject's Cash Burn A Worry?

As you can probably tell by now, we're not too worried about BIMobject's cash burn. In particular, we think its cash runway stands out as evidence that the company is well on top of its spending. Its revenue growth wasn't quite as good, but was still rather encouraging! After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash, as it seems on track to meet its needs over the medium term. An in-depth examination of risks revealed 1 warning sign for BIMobject that readers should think about before committing capital to this stock.

If you would prefer to check out another company with better fundamentals, then do not miss this free list of interesting companies, that have HIGH return on equity and low debt or this list of stocks which are all forecast to grow.

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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.