We Think Nurix Therapeutics (NASDAQ:NRIX) Can Afford To Drive Business Growth

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. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

So should Nurix Therapeutics (NASDAQ:NRIX) shareholders be worried about its cash burn? In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

Check out our latest analysis for Nurix Therapeutics

Does Nurix Therapeutics Have A Long Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. In November 2021, Nurix Therapeutics had US$296m in cash, and was debt-free. In the last year, its cash burn was US$90m. That means it had a cash runway of about 3.3 years as of November 2021. A runway of this length affords the company the time and space it needs to develop the business. You can see how its cash balance has changed over time in the image below.

How Well Is Nurix Therapeutics Growing?

One thing for shareholders to keep front in mind is that Nurix Therapeutics increased its cash burn by 1,843% in the last twelve months. While that certainly gives us pause for thought, we take a lot of comfort in the strong annual revenue growth of 67%. In light of the data above, we're fairly sanguine about the business growth trajectory. 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.

How Easily Can Nurix Therapeutics Raise Cash?

We are certainly impressed with the progress Nurix Therapeutics has made over the last year, but it is also worth considering how costly it would be if it wanted to raise more cash to fund 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. 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).

Nurix Therapeutics' cash burn of US$90m is about 15% of its US$614m 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 Nurix Therapeutics' Cash Burn?

On this analysis of Nurix Therapeutics' cash burn, we think its revenue growth was reassuring, while its increasing cash burn has us a bit worried. Based on the factors mentioned in this article, we think its cash burn situation warrants some attention from shareholders, but we don't think they should be worried. Separately, we looked at different risks affecting the company and spotted 4 warning signs for Nurix Therapeutics (of which 1 doesn't sit too well with us!) you should know about.

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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.