We're Interested To See How CuriosityStream (NASDAQ:CURI) Uses Its Cash Hoard To Grow

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. By way of example, CuriosityStream (NASDAQ:CURI) has seen its share price rise 216% over the last year, delighting many shareholders. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

Given its strong share price performance, we think it's worthwhile for CuriosityStream shareholders to consider whether its cash burn is concerning. 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'.

See our latest analysis for CuriosityStream

How Long Is CuriosityStream's Cash Runway?

You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. In June 2024, CuriosityStream had US$40m in cash, and was debt-free. Looking at the last year, the company burnt through US$2.7m. So it had a very long cash runway of many years from June 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. The image below shows how its cash balance has been changing over the last few years.

How Well Is CuriosityStream Growing?

CuriosityStream managed to reduce its cash burn by 92% over the last twelve months, which is extremely promising, when it comes to considering its need for cash. But it was a bit disconcerting to see operating revenue down 15% in that time. We think it is growing rather well, upon reflection. Clearly, however, the crucial factor is whether the company will grow its business going forward. So you might want to take a peek at how much the company is expected to grow in the next few years.

How Easily Can CuriosityStream Raise Cash?

There's no doubt CuriosityStream seems to be in a fairly good position, when it comes to managing its cash burn, but even if it's only hypothetical, it's always worth asking how easily it could raise more money to fund growth. 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.

CuriosityStream's cash burn of US$2.7m is about 2.7% of its US$102m 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.

Is CuriosityStream's Cash Burn A Worry?

As you can probably tell by now, we're not too worried about CuriosityStream's cash burn. In particular, we think its cash burn reduction stands out as evidence that the company is well on top of its spending. While its falling revenue wasn't great, the other factors mentioned in this article more than make up for weakness on that measure. 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. Taking a deeper dive, we've spotted 4 warning signs for CuriosityStream you should be aware of, and 1 of them can't be ignored.

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.