Yahoo Finance LightInTheBox Holding (NYSE:LITB) Is In A Good Position To Deliver On Growth Plans
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, 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 the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.
So should LightInTheBox Holding (NYSE:LITB) 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.
Check out our latest analysis for LightInTheBox Holding
When Might LightInTheBox Holding Run Out Of Money?
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. When LightInTheBox Holding last reported its December 2023 balance sheet in March 2024, it had zero debt and cash worth US$66m. Importantly, its cash burn was US$22m over the trailing twelve months. So it had a cash runway of about 3.0 years from December 2023. There's no doubt that this is a reassuringly long runway. You can see how its cash balance has changed over time in the image below.
Is LightInTheBox Holding's Revenue Growing?
We're hesitant to extrapolate on the recent trend to assess its cash burn, because LightInTheBox Holding actually had positive free cash flow last year, so operating revenue growth is probably our best bet to measure, right now. It's nice to see that operating revenue was up 25% in the last year. In reality, this article only makes a short study of the company's growth data. You can take a look at how LightInTheBox Holding has developed its business over time by checking this visualization of its revenue and earnings history.
Can LightInTheBox Holding Raise More Cash Easily?
Notwithstanding LightInTheBox Holding's revenue growth, it is still important to consider how it could raise more money, if it needs to. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.
LightInTheBox Holding's cash burn of US$22m is about 26% of its US$83m market capitalisation. That's not insignificant, and if the company had to sell enough shares to fund another year's growth at the current share price, you'd likely witness fairly costly dilution.
Is LightInTheBox Holding's Cash Burn A Worry?
It may already be apparent to you that we're relatively comfortable with the way LightInTheBox Holding 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. While its cash burn relative to its market cap wasn't great, the other factors mentioned in this article more than make up for weakness on that measure. Based on the factors mentioned in this article, we think its cash burn situation warrants some attention from shareholders, but we don't think they should be worried. Taking a deeper dive, we've spotted 3 warning signs for LightInTheBox Holding you should be aware of, and 1 of them can't be ignored.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies, and this list of stocks growth stocks (according to analyst forecasts)
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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.
