Is Moxian (BVI) (NASDAQ:MOXC) In A Good Position To Invest In Growth?

Just because a business does not make any money, does not mean that the stock will go down. 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. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

So should Moxian (BVI) (NASDAQ:MOXC) 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'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

View our latest analysis for Moxian (BVI)

Does Moxian (BVI) Have A Long 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 2023, Moxian (BVI) had US$1.5m in cash, and was debt-free. In the last year, its cash burn was US$2.6m. Therefore, from June 2023 it had roughly 7 months of cash runway. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. The image below shows how its cash balance has been changing over the last few years.

How Is Moxian (BVI)'s Cash Burn Changing Over Time?

In our view, Moxian (BVI) doesn't yet produce significant amounts of operating revenue, since it reported just US$131k in the last twelve months. As a result, we think it's a bit early to focus on the revenue growth, so we'll limit ourselves to looking at how the cash burn is changing over time. The good news, from a balance sheet perspective, is that it actually reduced its cash burn by 92% in the last twelve months. While that hardly points to growth potential, it does at least suggest the company is trying to survive. Admittedly, we're a bit cautious of Moxian (BVI) due to its lack of significant operating revenues. We prefer most of the stocks on this list of stocks that analysts expect to grow.

How Hard Would It Be For Moxian (BVI) To Raise More Cash For Growth?

While we're comforted by the recent reduction evident from our analysis of Moxian (BVI)'s cash burn, it is still worth considering how easily the company could raise more funds, if it wanted to accelerate spending to drive 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. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).

Moxian (BVI) has a market capitalisation of US$37m and burnt through US$2.6m last year, which is 7.1% 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 Moxian (BVI)'s Cash Burn A Worry?

Even though its cash runway makes us a little nervous, we are compelled to mention that we thought Moxian (BVI)'s cash burn reduction was relatively promising. 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. On another note, Moxian (BVI) has 5 warning signs (and 2 which are a bit unpleasant) we think you should know about.

Of course Moxian (BVI) 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 that insiders are buying.

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.