We're Not Worried About Ispire Technology's (NASDAQ:ISPR) Cash Burn

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

Given this risk, we thought we'd take a look at whether Ispire Technology (NASDAQ:ISPR) shareholders should 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 Ispire Technology

Does Ispire Technology Have A Long 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 Ispire Technology last reported its September 2024 balance sheet in November 2024, it had zero debt and cash worth US$38m. Importantly, its cash burn was US$4.8m over the trailing twelve months. So it had a cash runway of about 7.8 years from September 2024. 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. You can see how its cash balance has changed over time in the image below.

How Well Is Ispire Technology Growing?

Ispire Technology managed to reduce its cash burn by 81% over the last twelve months, which suggests it's on the right flight path. And while hardly exciting, it was still good to see revenue growth of 13% during that time. We think it is growing rather well, upon reflection. While the past is always worth studying, it is the future that matters most of all. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

How Easily Can Ispire Technology Raise Cash?

We are certainly impressed with the progress Ispire Technology 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. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. 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.

Ispire Technology's cash burn of US$4.8m is about 1.5% of its US$314m market capitalisation. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.

So, Should We Worry About Ispire Technology's Cash Burn?

As you can probably tell by now, we're not too worried about Ispire Technology's cash burn. In particular, we think its cash runway stands out as evidence that the company is well on top of its spending. And even though its revenue growth 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. Separately, we looked at different risks affecting the company and spotted 2 warning signs for Ispire Technology (of which 1 can't be ignored!) you should know about.

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.