Stock Analysis
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 software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.
So should Immunome (NASDAQ:IMNM) 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'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.
See our latest analysis for Immunome
Does Immunome Have A Long 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. When Immunome last reported its balance sheet in September 2022, it had zero debt and cash worth US$27m. Looking at the last year, the company burnt through US$29m. That means it had a cash runway of around 11 months as of September 2022. Importantly, the one analyst we see covering the stock thinks that Immunome will reach cashflow breakeven in around 18 months. That means unless the company reduces its cash burn quickly, it may well look to raise more cash. The image below shows how its cash balance has been changing over the last few years.
How Is Immunome's Cash Burn Changing Over Time?
Immunome didn't record any revenue over the last year, indicating that it's an early stage company still developing its business. So while we can't look to sales to understand growth, we can look at how the cash burn is changing to understand how expenditure is trending over time. Over the last year its cash burn actually increased by a very significant 65%. While this spending increase is no doubt intended to drive growth, if the trend continues the company's cash runway will shrink very quickly. While the past is always worth studying, it is the future that matters most of all. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.
Can Immunome Raise More Cash Easily?
Given its cash burn trajectory, Immunome 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. 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).
Since it has a market capitalisation of US$62m, Immunome's US$29m in cash burn equates to about 46% of its market value. That's high expenditure relative to the value of the entire company, so if it does have to issue shares to fund more growth, that could end up really hurting shareholders returns (through significant dilution).
So, Should We Worry About Immunome's Cash Burn?
We must admit that we don't think Immunome is in a very strong position, when it comes to its cash burn. While its cash runway wasn't too bad, its cash burn relative to its market cap does leave us rather nervous. There's no doubt that shareholders can take a lot of heart from the fact that at least one analyst is forecasting it will reach breakeven before too long. 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. On another note, Immunome has 4 warning signs (and 3 which can't be ignored) we think you should know about.
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)
What are the risks and opportunities for Immunome?
Immunome, Inc., a biopharmaceutical company, discovers and develops antibody therapeutics for oncology and infectious disease.
Risks
Earnings are forecast to decline by an average of 5.6% per year for the next 3 years
Has less than 1 year of cash runway
Highly volatile share price over the past 3 months
Makes less than USD$1m in revenue ($0)
Does not have a meaningful market cap ($66M)
Currently unprofitable and not forecast to become profitable over the next 3 years
Further research on
Immunome
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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.
About NasdaqCM:IMNM
Immunome
Immunome, Inc., a biopharmaceutical company, discovers and develops antibody therapeutics for oncology and infectious disease.
Adequate balance sheet with weak fundamentals.
