We're Hopeful That Litium (STO:LITI) Will Use Its Cash Wisely

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. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

So should Litium (STO:LITI) 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. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Does Litium 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. As at June 2025, Litium had cash of kr4.2m and no debt. In the last year, its cash burn was kr3.7m. That means it had a cash runway of around 14 months as of June 2025. Notably, one analyst forecasts that Litium will break even (at a free cash flow level) in about 21 months. That means unless the company reduces its cash burn quickly, it may well look to raise more cash. The image below shows how its cash balance has been changing over the last few years.

Check out our latest analysis for Litium

How Well Is Litium Growing?

It was fairly positive to see that Litium reduced its cash burn by 33% during the last year. Revenue also improved during the period, increasing by 3.8%. Considering the factors above, the company doesn’t fare badly when it comes to assessing how it is changing over time. Clearly, however, the crucial factor is whether the company will grow its business going forward. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

Can Litium Raise More Cash Easily?

While Litium 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. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund 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.

Since it has a market capitalisation of kr236m, Litium's kr3.7m in cash burn equates to about 1.6% of its market value. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.

Is Litium's Cash Burn A Worry?

It may already be apparent to you that we're relatively comfortable with the way Litium is burning through its cash. For example, we think its cash burn relative to its market cap suggests that the company is on a good path. Its weak point is its cash runway, but even that wasn't too bad! There's no doubt that shareholders can take a lot of heart from the fact that at least one analyst is forecasting it will reach breakeven before too long. After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash. An in-depth examination of risks revealed 1 warning sign for Litium that readers should think about before committing capital to this stock.

Of course Litium may not be the best stock to buy. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.