Angion Biomedica (NASDAQ:ANGN) Will Have To Spend Its Cash Wisely

There's no doubt that money can be made by owning shares of unprofitable businesses. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

So, the natural question for Angion Biomedica (NASDAQ:ANGN) shareholders is whether they should be concerned by its rate of cash burn. For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

See our latest analysis for Angion Biomedica

When Might Angion Biomedica Run Out Of Money?

A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. As at September 2022, Angion Biomedica had cash of US$55m and such minimal debt that we can ignore it for the purposes of this analysis. Looking at the last year, the company burnt through US$48m. Therefore, from September 2022 it had roughly 14 months of cash runway. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. Depicted below, you can see how its cash holdings have changed over time.

How Well Is Angion Biomedica Growing?

Notably, Angion Biomedica actually ramped up its cash burn very hard and fast in the last year, by 168%, signifying heavy investment in the business. Given that operating revenue was up a stupendous 898% over the last year, there's a good chance the investment will pay off. Considering both these factors, we're not particularly excited by its growth profile. While the past is always worth studying, it is the future that matters most of all. So you might want to take a peek at how much the company is expected to grow in the next few years.

Can Angion Biomedica Raise More Cash Easily?

While Angion Biomedica seems to be in a fairly good position, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. 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 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.

Since it has a market capitalisation of US$27m, Angion Biomedica's US$48m in cash burn equates to about 182% of its market value. That suggests the company may have some funding difficulties, and we'd be very wary of the stock.

How Risky Is Angion Biomedica's Cash Burn Situation?

On this analysis of Angion Biomedica's cash burn, we think its revenue growth was reassuring, while its cash burn relative to its market cap has us a bit worried. Considering all the measures mentioned in this report, we reckon that its cash burn is fairly risky, and if we held shares we'd be watching like a hawk for any deterioration. Its important for readers to be cognizant of the risks that can affect the company's operations, and we've picked out 1 warning sign for Angion Biomedica that investors should know when investing in the stock.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies, 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.