Blade Air Mobility (NASDAQ:BLDE) Is In A Good Position To Deliver On Growth Plans

We can readily understand why investors are attracted to unprofitable companies. 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 while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

So should Blade Air Mobility (NASDAQ:BLDE) shareholders be worried about its cash burn? For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called 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 Blade Air Mobility

SWOT Analysis for Blade Air Mobility

How Long Is Blade Air Mobility'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. When Blade Air Mobility last reported its balance sheet in December 2022, it had zero debt and cash worth US$194m. Importantly, its cash burn was US$38m over the trailing twelve months. So it had a cash runway of about 5.1 years from December 2022. Notably, however, analysts think that Blade Air Mobility will break even (at a free cash flow level) before then. In that case, it may never reach the end of its cash runway. The image below shows how its cash balance has been changing over the last few years.

How Well Is Blade Air Mobility Growing?

Some investors might find it troubling that Blade Air Mobility is actually increasing its cash burn, which is up 9.8% in the last year. On a more positive note, the operating revenue improved by 118% over the period, offering an indication that the expenditure may well be worthwhile. If revenue is maintained once spending on growth decreases, that could well pay off! It seems to be growing nicely. Clearly, however, the crucial factor is whether the company will grow its business going forward. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

How Easily Can Blade Air Mobility Raise Cash?

There's no doubt Blade Air Mobility 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. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. Many companies end up issuing new shares to fund future 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).

Blade Air Mobility has a market capitalisation of US$205m and burnt through US$38m last year, which is 18% of the company's market value. As a result, we'd venture that the company could raise more cash for growth without much trouble, albeit at the cost of some dilution.

How Risky Is Blade Air Mobility's Cash Burn Situation?

It may already be apparent to you that we're relatively comfortable with the way Blade Air Mobility is burning through its cash. For example, we think its revenue growth suggests that the company is on a good path. While its increasing cash burn wasn't great, the other factors mentioned in this article more than make up for weakness on that measure. Shareholders can take heart from the fact that analysts are forecasting it will reach breakeven. After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash, as it seems on track to meet its needs over the medium term. Taking an in-depth view of risks, we've identified 3 warning signs for Blade Air Mobility 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.

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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.