We're Not Worried About Intellicheck's (NASDAQ:IDN) Cash Burn

Just because a business does not make any money, does not mean that the stock will go down. 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. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

So should Intellicheck (NASDAQ:IDN) shareholders be worried about its cash burn? For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

Check out our latest analysis for Intellicheck

How Long Is Intellicheck's Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. As at March 2021, Intellicheck had cash of US$13m and such minimal debt that we can ignore it for the purposes of this analysis. Looking at the last year, the company burnt through US$397k. So it had a very long cash runway of many years from March 2021. Depicted below, you can see how its cash holdings have changed over time.

How Well Is Intellicheck Growing?

Intellicheck managed to reduce its cash burn by 79% over the last twelve months, which suggests it's on the right flight path. And it could also show revenue growth of 10% in the same period. It seems to be growing nicely. 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 Intellicheck Raise More Cash Easily?

There's no doubt Intellicheck seems to be in a fairly good position, when it comes to managing its cash burn, but even if it's only hypothetical, it's always worth asking how easily it could raise more money to fund growth. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund 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$140m, Intellicheck's US$397k in cash burn equates to about 0.3% of its market value. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.

So, Should We Worry About Intellicheck's Cash Burn?

It may already be apparent to you that we're relatively comfortable with the way Intellicheck is burning through its cash. In particular, we think its cash runway stands out as evidence that the company is well on top of its spending. Its weak point is its revenue growth, but even that wasn't too bad! After considering a range of factors in this article, we're pretty relaxed about its cash burn, since the company seems to be in a good position to continue to fund its growth. Its important for readers to be cognizant of the risks that can affect the company's operations, and we've picked out 3 warning signs for Intellicheck 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 companies insiders are buying, and this list of stocks growth stocks (according to analyst forecasts)

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