Will Aclaris Therapeutics (NASDAQ:ACRS) Spend Its Cash Wisely?

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 the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

Given this risk, we thought we'd take a look at whether Aclaris Therapeutics (NASDAQ:ACRS) shareholders should 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. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

Our free stock report includes 3 warning signs investors should be aware of before investing in Aclaris Therapeutics. Read for free now.

How Long Is Aclaris Therapeutics' Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. As at March 2025, Aclaris Therapeutics had cash of US$105m and no debt. In the last year, its cash burn was US$49m. So it had a cash runway of about 2.1 years from March 2025. That's decent, giving the company a couple years to develop its business. The image below shows how its cash balance has been changing over the last few years.

Check out our latest analysis for Aclaris Therapeutics

How Well Is Aclaris Therapeutics Growing?

We reckon the fact that Aclaris Therapeutics managed to shrink its cash burn by 34% over the last year is rather encouraging. Unfortunately, however, operating revenue declined by 43% during the period. In light of the data above, we're fairly sanguine about the business growth trajectory. 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.

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

Aclaris Therapeutics 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. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund 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).

Aclaris Therapeutics' cash burn of US$49m is about 35% of its US$141m market capitalisation. That's not insignificant, and if the company had to sell enough shares to fund another year's growth at the current share price, you'd likely witness fairly costly dilution.

How Risky Is Aclaris Therapeutics' Cash Burn Situation?

On this analysis of Aclaris Therapeutics' cash burn, we think its cash runway 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. On another note, Aclaris Therapeutics has 3 warning signs (and 2 which are concerning) we think you should know about.

Of course Aclaris Therapeutics 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 with high insider ownership.

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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.