We're A Little Worried About Movano's (NASDAQ:MOVE) Cash Burn Rate

We can readily understand why investors are attracted to unprofitable companies. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

Given this risk, we thought we'd take a look at whether Movano (NASDAQ:MOVE) 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. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

View our latest analysis for Movano

When Might Movano Run Out Of Money?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. In June 2024, Movano had US$17m in cash, and was debt-free. Looking at the last year, the company burnt through US$25m. That means it had a cash runway of around 8 months as of June 2024. To be frank, this kind of short runway puts us on edge, as it indicates the company must reduce its cash burn significantly, or else raise cash imminently. You can see how its cash balance has changed over time in the image below.

How Is Movano's Cash Burn Changing Over Time?

Whilst it's great to see that Movano has already begun generating revenue from operations, last year it only produced US$852k, so we don't think it is generating significant revenue, at this point. Therefore, for the purposes of this analysis we'll focus on how the cash burn is tracking. It's possible that the 8.4% reduction in cash burn over the last year is evidence of management tightening their belts as cash reserves deplete. 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 Movano Raise Cash?

While Movano is showing a solid reduction in its cash burn, it's still worth considering how easily it could raise more cash, even just to fuel 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. 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.

Movano's cash burn of US$25m is about 76% of its US$32m market capitalisation. Given how large that cash burn is, relative to the market value of the entire company, we'd consider it to be a high risk stock, with the real possibility of extreme dilution.

Is Movano's Cash Burn A Worry?

On this analysis of Movano's cash burn, we think its cash burn reduction was reassuring, while its cash burn relative to its market cap has us a bit worried. Once we consider the metrics mentioned in this article together, we're left with very little confidence in the company's ability to manage its cash burn, and we think it will probably need more money. On another note, Movano has 6 warning signs (and 3 which are significant) we think 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.