Even when a business is losing money, it’s possible for shareholders to make money if they buy a good business at the right price. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.
So should Shattuck Labs (NASDAQ:STTK) 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). Let’s start with an examination of the business’ cash, relative to its cash burn.
View our latest analysis for Shattuck Labs
How Long Is Shattuck Labs’ Cash Runway?
A company’s cash runway is calculated by dividing its cash hoard by its cash burn. When Shattuck Labs last reported its balance sheet in September 2022, it had zero debt and cash worth US$185m. Looking at the last year, the company burnt through US$102m. So it had a cash runway of approximately 22 months from September 2022. That’s not too bad, but it’s fair to say the end of the cash runway is in sight, unless cash burn reduces drastically. The image below shows how its cash balance has been changing over the last few years.
How Well Is Shattuck Labs Growing?
Shattuck Labs boosted investment sharply in the last year, with cash burn ramping by 75%. But shareholders are no doubt taking some confidence from the rockstar revenue growth of 2,268% during that same year. Considering the factors above, the company doesn’t fare badly when it comes to assessing how it is changing over time. 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.
How Easily Can…
Read complete post here: