We Think Bolt Biotherapeutics (NASDAQ:BOLT) Needs To Drive Business Growth Carefully

There's no doubt that money can be made by owning shares of unprofitable businesses. 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. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

So, the natural question for Bolt Biotherapeutics (NASDAQ:BOLT) shareholders is whether they should be concerned by its rate of cash burn. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

View our latest analysis for Bolt Biotherapeutics

How Long Is Bolt Biotherapeutics' 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 September 2023, Bolt Biotherapeutics had US$120m in cash, and was debt-free. Looking at the last year, the company burnt through US$74m. That means it had a cash runway of around 20 months as of September 2023. 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. The image below shows how its cash balance has been changing over the last few years.

How Well Is Bolt Biotherapeutics Growing?

Bolt Biotherapeutics reduced its cash burn by 6.5% during the last year, which points to some degree of discipline. On top of that, operating revenue was up 49%, making for a heartening combination We think it is growing rather well, upon reflection. 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.

Can Bolt Biotherapeutics Raise More Cash Easily?

Bolt Biotherapeutics 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. 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).

Bolt Biotherapeutics has a market capitalisation of US$42m and burnt through US$74m last year, which is 176% of the company's market value. That suggests the company may have some funding difficulties, and we'd be very wary of the stock.

So, Should We Worry About Bolt Biotherapeutics' Cash Burn?

On this analysis of Bolt Biotherapeutics' cash burn, we think its revenue growth was reassuring, while its cash burn relative to its market cap has us a bit worried. Looking at the factors mentioned in this short report, we do think that its cash burn is a bit risky, and it does make us slightly nervous about the stock. Taking a deeper dive, we've spotted 3 warning signs for Bolt Biotherapeutics you should be aware of, and 1 of them is concerning.

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.