Here's Why We're Not Too Worried About Stran's (NASDAQ:SWAG) Cash Burn Situation

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, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

So should Stran (NASDAQ:SWAG) 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. Let's start with an examination of the business' cash, relative to its cash burn.

See our latest analysis for Stran

When Might Stran Run Out Of Money?

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. When Stran last reported its June 2024 balance sheet in February 2025, it had zero debt and cash worth US$23m. In the last year, its cash burn was US$2.9m. That means it had a cash runway of about 8.0 years as of June 2024. While this is only one measure of its cash burn situation, it certainly gives us the impression that holders have nothing to worry about. You can see how its cash balance has changed over time in the image below.

How Well Is Stran Growing?

One thing for shareholders to keep front in mind is that Stran increased its cash burn by 2,403% in the last twelve months. That does give us pause, and we can't take much solace in the operating revenue growth of 20% in the same time frame. Considering both these metrics, we're a little concerned about how the company is developing. Of course, we've only taken a quick look at the stock's growth metrics, here. This graph of historic earnings and revenue shows how Stran is building its business over time.

How Hard Would It Be For Stran To Raise More Cash For Growth?

Stran 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. Commonly, a business will sell new shares in itself to raise cash and drive 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.

Stran's cash burn of US$2.9m is about 14% of its US$21m market capitalisation. Given that situation, it's fair to say the company wouldn't have much trouble raising more cash for growth, but shareholders would be somewhat diluted.

Is Stran's Cash Burn A Worry?

Even though its increasing cash burn makes us a little nervous, we are compelled to mention that we thought Stran's cash runway was relatively promising. While we're the kind of investors who are always a bit concerned about the risks involved with cash burning companies, the metrics we have discussed in this article leave us relatively comfortable about Stran's situation. On another note, we conducted an in-depth investigation of the company, and identified 3 warning signs for Stran (1 can't be ignored!) that you should be aware of before investing here.

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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.