Will CureVac (NASDAQ:CVAC) Spend Its Cash Wisely?

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, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.

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

View our latest analysis for CureVac

How Long Is CureVac's Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When CureVac last reported its balance sheet in March 2022, it had zero debt and cash worth €658m. Looking at the last year, the company burnt through €782m. Therefore, from March 2022 it had roughly 10 months of cash runway. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. You can see how its cash balance has changed over time in the image below.

Is CureVac's Revenue Growing?

We're hesitant to extrapolate on the recent trend to assess its cash burn, because CureVac actually had positive free cash flow last year, so operating revenue growth is probably our best bet to measure, right now. Pleasingly, the company produced stunning operating revenue growth of 110% over the last year. 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 CureVac Raise More Cash Easily?

There's no doubt CureVac's revenue growth is impressive but even if it's only hypothetical, it's always worth asking how easily it could raise more money to fund further growth. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. 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).

CureVac's cash burn of €782m is about 23% of its €3.4b 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.

Is CureVac's Cash Burn A Worry?

Even though its cash runway makes us a little nervous, we are compelled to mention that we thought CureVac's revenue growth was relatively promising. 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. 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 CureVac 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.