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Is Y-mAbs Therapeutics (NASDAQ:YMAB) In A Good Position To Invest In Growth?
There's no doubt that money can be made by owning shares of unprofitable businesses. 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. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.
Given this risk, we thought we'd take a look at whether Y-mAbs Therapeutics (NASDAQ:YMAB) shareholders should 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. Let's start with an examination of the business' cash, relative to its cash burn.
See our latest analysis for Y-mAbs Therapeutics
How Long Is Y-mAbs Therapeutics' Cash Runway?
A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. As at March 2022, Y-mAbs Therapeutics had cash of US$157m and no debt. Importantly, its cash burn was US$104m over the trailing twelve months. So it had a cash runway of approximately 18 months from March 2022. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. The image below shows how its cash balance has been changing over the last few years.
How Well Is Y-mAbs Therapeutics Growing?
In the last twelve months, Y-mAbs Therapeutics kept its cash burn steady. What was not flat was its operating revenue, which gained 53%. 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. So you might want to take a peek at how much the company is expected to grow in the next few years.
Can Y-mAbs Therapeutics Raise More Cash Easily?
While Y-mAbs Therapeutics seems to be in a fairly good position, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. 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.
Since it has a market capitalisation of US$367m, Y-mAbs Therapeutics' US$104m in cash burn equates to about 28% of its market value. That's fairly notable cash burn, so if the company had to sell shares to cover the cost of another year's operations, shareholders would suffer some costly dilution.
Is Y-mAbs Therapeutics' Cash Burn A Worry?
Even though its cash burn relative to its market cap makes us a little nervous, we are compelled to mention that we thought Y-mAbs Therapeutics' revenue growth was relatively promising. Cash burning companies are always on the riskier side of things, but after considering all of the factors discussed in this short piece, we're not too worried about its rate of cash burn. Taking an in-depth view of risks, we've identified 2 warning signs for Y-mAbs Therapeutics that you should be aware of before investing.
If you would prefer to check out another company with better fundamentals, then do not miss this free list of interesting companies, that have HIGH return on equity and low debt or this list of stocks which are all forecast to grow.
What are the risks and opportunities for Y-mAbs Therapeutics?
Y-mAbs Therapeutics, Inc., a commercial-stage biopharmaceutical company, focuses on the development and commercialization of novel antibody based therapeutic products for the treatment of cancer in the United States.
Rewards
Revenue is forecast to grow 11.75% per year
Risks
Highly volatile share price over the past 3 months
Currently unprofitable and not forecast to become profitable over the next 3 years
Further research on
Y-mAbs Therapeutics
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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 NasdaqGS:YMAB
Y-mAbs Therapeutics
Y-mAbs Therapeutics, Inc., a commercial-stage biopharmaceutical company, focuses on the development and commercialization of novel antibody based therapeutic products for the treatment of cancer in the United States.
Flawless balance sheet and fair value.
