We Think Alpine Immune Sciences (NASDAQ:ALPN) Can Afford To Drive Business Growth

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 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 while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

So should Alpine Immune Sciences (NASDAQ:ALPN) 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'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

Check out our latest analysis for Alpine Immune Sciences

How Long Is Alpine Immune Sciences' 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, Alpine Immune Sciences had US$204m in cash, and was debt-free. Looking at the last year, the company burnt through US$78m. Therefore, from June 2023 it had 2.6 years of cash runway. That's decent, giving the company a couple years to develop its business. You can see how its cash balance has changed over time in the image below.

Is Alpine Immune Sciences' Revenue Growing?

We're hesitant to extrapolate on the recent trend to assess its cash burn, because Alpine Immune Sciences actually had positive free cash flow last year, so operating revenue growth is probably our best bet to measure, right now. Unfortunately, the last year has been a disappointment, with operating revenue dropping 8.9% during the period. 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 Alpine Immune Sciences To Raise More Cash For Growth?

Given its problematic fall in revenue, Alpine Immune Sciences shareholders should consider how the company could fund its growth, if it turns out it needs more cash. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Many companies end up issuing new shares to fund future growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.

Alpine Immune Sciences' cash burn of US$78m is about 14% of its US$567m 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 Alpine Immune Sciences' Cash Burn A Worry?

On this analysis of Alpine Immune Sciences' cash burn, we think its cash runway was reassuring, while its falling revenue has us a bit worried. Based on the factors mentioned in this article, we think its cash burn situation warrants some attention from shareholders, but we don't think they should be worried. Taking a deeper dive, we've spotted 3 warning signs for Alpine Immune Sciences you should be aware of, and 2 of them are a bit concerning.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies insiders are buying, and this list of stocks growth stocks (according to analyst forecasts)

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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.