Anterix (NASDAQ:ATEX) Is In A Strong Position To Grow Its Business

Just because a business does not make any money, does not mean that the stock will go down. 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.

So should Anterix (NASDAQ:ATEX) 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 Anterix

How Long Is Anterix's Cash Runway?

A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. In March 2021, Anterix had US$118m in cash, and was debt-free. In the last year, its cash burn was US$24m. Therefore, from March 2021 it had 4.9 years of cash runway. Notably, however, analysts think that Anterix will break even (at a free cash flow level) before then. In that case, it may never reach the end of its cash runway. You can see how its cash balance has changed over time in the image below.

How Is Anterix's Cash Burn Changing Over Time?

In our view, Anterix doesn't yet produce significant amounts of operating revenue, since it reported just US$921k in the last twelve months. As a result, we think it's a bit early to focus on the revenue growth, so we'll limit ourselves to looking at how the cash burn is changing over time. While it hardly paints a picture of imminent growth, the fact that it has reduced its cash burn by 32% over the last year suggests some degree of prudence. 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 Anterix Raise Cash?

While Anterix 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. 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. 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$1.1b, Anterix's US$24m in cash burn equates to about 2.2% 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.

How Risky Is Anterix's Cash Burn Situation?

It may already be apparent to you that we're relatively comfortable with the way Anterix 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 cash burn reduction wasn't quite as good, but was still rather encouraging! One real positive is that analysts are forecasting that the company will reach breakeven. 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. On another note, Anterix has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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.

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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.
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