It's easy to see why investors are attracted to unprofitable companies. For example, Amazon.com lost money for years after going public, but if you had bought and held the stock since 1999, you could have made a lot of money. That being said, there are risks involved, as unprofitable companies can burn through all their cash and go into distress.
you should joint diagnosis (NASDAQ:CODX) shareholders worried about its cash burn? In this report, we consider the company's negative free cash flow for the year. We will refer to this as “cash burn” from now on. The first step is to compare its cash burn to its cash reserves to uncover its 'cash runway'.
Check out our latest analysis for Co-Diagnostics.
What is the funding runway for Co-Diagnostics?
A company's cash runway is the amount of time it takes to use up its cash reserves at its current cash burn rate. As of December 2023, Co-Diagnostics had cash of US$59 million and no debt. Looking at last year, the company used up his US$23 million. This means it had a cash runway of approximately 2.5 years as of December 2023. This is a reasonable number considering the company has had several years to develop its business. You can see how its cash balance has changed over time in the image below.
Can Co-Diagnostics easily raise more cash?
The most common ways for publicly traded companies to raise more money for their operations is by issuing new shares or taking on debt. Companies typically sell their new stock to raise cash and fuel growth. By comparing a company's annual cash burn to its total market capitalization, we can roughly estimate how many shares it would need to issue to run the company for another year (at the same burn rate).
Co-Diagnostics has a market capitalization of US$36m, and it burned through US$23m, or 64% of its market value, in the last year. This suggests that the company's expenses are very high relative to its size, making it a very risky stock.
How risky is Co-Diagnostics' cash burn situation?
Co-Diagnostics is an early-stage company, so we don't have much data to form an opinion on its cash burn. But it's fair to say that its cash runway has given us peace of mind. So while we're not too worried about its cash burn at the moment, we think shareholders will need to monitor it closely. On a different note, we conducted a thorough investigation and identified the following: Two warning signs about simultaneous diagnosis (1 can't be ignored!) Here's what you need to know before investing.
of course, You may find a great investment if you look elsewhere. So take a look at this free A list of companies that insiders are buying, as well as this list of growth stocks (as predicted by analysts).
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
