We're Keeping An Eye On Agrimin's (ASX:AMN) Cash Burn Rate

3 min read
fairly easy
Just because a business does not make any money, does not mean that the stock will go down. For example, biotech and...
mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

So should Agrimin (ASX:AMN) 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.

View our latest analysis for Agrimin

How Long Is Agrimin's Cash Runway?

You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. As at December 2020, Agrimin had cash of AU$7.7m and no debt. Looking at the last year, the company burnt through AU$9.1m. That means it had a cash runway of around 10 months as of December 2020. Notably, analysts forecast that Agrimin will break even (at a free cash flow level) in about 4 years. That means unless the company reduces its cash burn quickly, it may well look to raise more cash. Depicted below, you can see how its cash holdings have changed over time.

How Is Agrimin's Cash Burn Changing Over Time?

While Agrimin did record statutory revenue of AU$233k over the last year, it didn't have any revenue from operations. To us, that makes it a pre-revenue company, so…
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