We're Hopeful That CorMedix (NASDAQ:CRMD) Will Use Its Cash Wisely

Just because a business does not make any money, does not mean that the stock will go down. For example, CorMedix (NASDAQ:CRMD) shareholders have done very well over the last year, with the share price soaring by 127%. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

Given its strong share price performance, we think it's worthwhile for CorMedix shareholders to consider whether its cash burn is concerning. 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). First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

See our latest analysis for CorMedix

Does CorMedix Have A Long Cash Runway?

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. When CorMedix last reported its June 2024 balance sheet in August 2024, it had zero debt and cash worth US$46m. Looking at the last year, the company burnt through US$51m. Therefore, from June 2024 it had roughly 11 months of cash runway. Notably, analysts forecast that CorMedix will break even (at a free cash flow level) in about 13 months. That means it doesn't have a great deal of breathing room, but it shouldn't really need more cash, considering that cash burn should be continually reducing. The image below shows how its cash balance has been changing over the last few years.

How Is CorMedix's Cash Burn Changing Over Time?

Whilst it's great to see that CorMedix has already begun generating revenue from operations, last year it only produced US$806k, so we don't think it is generating significant revenue, at this point. Therefore, for the purposes of this analysis we'll focus on how the cash burn is tracking. During the last twelve months, its cash burn actually ramped up 63%. Oftentimes, increased cash burn simply means a company is accelerating its business development, but one should always be mindful that this causes the cash runway to shrink. Clearly, however, the crucial factor is whether the company will grow its business going forward. So you might want to take a peek at how much the company is expected to grow in the next few years.

Can CorMedix Raise More Cash Easily?

Given its cash burn trajectory, CorMedix shareholders should already be thinking about how easy it might be for it to raise further cash in the future. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. 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.

CorMedix's cash burn of US$51m is about 11% of its US$450m market capitalisation. As a result, we'd venture that the company could raise more cash for growth without much trouble, albeit at the cost of some dilution.

So, Should We Worry About CorMedix's Cash Burn?

Even though its increasing cash burn makes us a little nervous, we are compelled to mention that we thought CorMedix's cash burn relative to its market cap was relatively promising. There's no doubt that shareholders can take a lot of heart from the fact that analysts are forecasting it will reach breakeven before too long. Considering all the factors discussed in this article, we're not overly concerned about the company's cash burn, although we do think shareholders should keep an eye on how it develops. Separately, we looked at different risks affecting the company and spotted 3 warning signs for CorMedix (of which 1 is a bit concerning!) you should know about.

Of course CorMedix 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.