Twist Bioscience (NASDAQ:TWST) Is In A Good Position To Deliver On Growth Plans

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 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. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

So, the natural question for Twist Bioscience (NASDAQ:TWST) 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'. Let's start with an examination of the business' cash, relative to its cash burn.

View our latest analysis for Twist Bioscience

When Might Twist Bioscience Run Out Of Money?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. In June 2023, Twist Bioscience had US$357m in cash, and was debt-free. Importantly, its cash burn was US$165m over the trailing twelve months. So it had a cash runway of about 2.2 years from June 2023. That's decent, giving the company a couple years to develop its business. Depicted below, you can see how its cash holdings have changed over time.

How Well Is Twist Bioscience Growing?

It was fairly positive to see that Twist Bioscience reduced its cash burn by 34% during the last year. And considering that its operating revenue gained 28% during that period, that's great to see. We think it is growing rather well, upon reflection. 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 Twist Bioscience Raise Cash?

While Twist Bioscience seems to be in a decent position, we reckon it is still worth thinking about how easily it could raise more cash, if that proved desirable. Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.

Since it has a market capitalisation of US$1.1b, Twist Bioscience's US$165m in cash burn equates to about 15% of its market value. Given that situation, it's fair to say the company wouldn't have much trouble raising more cash for growth, but shareholders would be somewhat diluted.

How Risky Is Twist Bioscience's Cash Burn Situation?

Twist Bioscience appears to be in pretty good health when it comes to its cash burn situation. One the one hand we have its solid revenue growth, while on the other it can also boast very strong cash runway. 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. An in-depth examination of risks revealed 2 warning signs for Twist Bioscience that readers should think about before committing capital to this stock.

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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.