We're Keeping An Eye On Modelon's (STO:MODEL) Cash Burn Rate

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 the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.

So should Modelon (STO:MODEL) shareholders be worried about its 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. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

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Does Modelon Have A Long Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When Modelon last reported its September 2025 balance sheet in October 2025, it had zero debt and cash worth kr52m. In the last year, its cash burn was kr40m. Therefore, from September 2025 it had roughly 15 months of cash runway. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. You can see how its cash balance has changed over time in the image below.

Check out our latest analysis for Modelon

How Well Is Modelon Growing?

We reckon the fact that Modelon managed to shrink its cash burn by 27% over the last year is rather encouraging. But the revenue dip of 4.3% in the same period was a bit concerning. On balance, we'd say the company is improving 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 Modelon Raise More Cash Easily?

Modelon 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. 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.

Modelon's cash burn of kr40m is about 21% of its kr191m market capitalisation. That's fairly notable cash burn, so if the company had to sell shares to cover the cost of another year's operations, shareholders would suffer some costly dilution.

How Risky Is Modelon's Cash Burn Situation?

On this analysis of Modelon's cash burn, we think its cash burn reduction was reassuring, while its falling revenue has us a bit worried. We don't think its cash burn is particularly problematic, but after considering the range of factors in this article, we do think shareholders should be monitoring how it changes over time. Taking an in-depth view of risks, we've identified 3 warning signs for Modelon that you should be aware of before investing.

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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.