Yahoo Finance We Think Amprius Technologies (NYSE:AMPX) Needs To Drive Business Growth Carefully
We can readily understand why investors are attracted to unprofitable companies. 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.
Given this risk, we thought we'd take a look at whether Amprius Technologies (NYSE:AMPX) shareholders should be worried about its cash burn. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.
View our latest analysis for Amprius Technologies
When Might Amprius Technologies Run Out Of Money?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. In March 2024, Amprius Technologies had US$39m in cash, and was debt-free. Looking at the last year, the company burnt through US$49m. Therefore, from March 2024 it had roughly 10 months of cash runway. Notably, analysts forecast that Amprius Technologies will break even (at a free cash flow level) in about 3 years. That means unless the company reduces its cash burn quickly, it may well look to raise more cash. The image below shows how its cash balance has been changing over the last few years.
How Well Is Amprius Technologies Growing?
Notably, Amprius Technologies actually ramped up its cash burn very hard and fast in the last year, by 147%, signifying heavy investment in the business. It seems likely that the vociferous operating revenue growth of 260% during that time may well have given management confidence to ramp investment. 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. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.
How Easily Can Amprius Technologies Raise Cash?
Given the trajectory of Amprius Technologies' cash burn, many investors will already be thinking about how it might raise more cash in the future. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Commonly, a business will sell new shares in itself to raise cash and drive 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).
Amprius Technologies has a market capitalisation of US$117m and burnt through US$49m last year, which is 42% of the company's market value. From this perspective, it seems that the company spent a huge amount relative to its market value, and we'd be very wary of a painful capital raising.
So, Should We Worry About Amprius Technologies' Cash Burn?
On this analysis of Amprius Technologies' cash burn, we think its revenue growth was reassuring, while its increasing cash burn has us a bit worried. Shareholders can take heart from the fact that analysts are forecasting it will reach breakeven. Summing up, we think the Amprius Technologies' cash burn is a risk, based on the factors we mentioned in this article. Separately, we looked at different risks affecting the company and spotted 4 warning signs for Amprius Technologies (of which 1 doesn't sit too well with us!) you should know about.
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.
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