Yahoo Finance We're Not Worried About Genius Sports' (NYSE:GENI) Cash Burn
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.
Given this risk, we thought we'd take a look at whether Genius Sports (NYSE:GENI) 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'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.
Check out our latest analysis for Genius Sports
Does Genius Sports Have A Long Cash Runway?
A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. Genius Sports has such a small amount of debt that we'll set it aside, and focus on the US$73m in cash it held at March 2024. In the last year, its cash burn was US$32m. That means it had a cash runway of about 2.3 years as of March 2024. Importantly, though, analysts think that Genius Sports will reach cashflow breakeven before then. In that case, it may never reach the end of its cash runway. You can see how its cash balance has changed over time in the image below.
How Well Is Genius Sports Growing?
It was fairly positive to see that Genius Sports reduced its cash burn by 26% during the last year. And considering that its operating revenue gained 24% during that period, that's great to see. 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.
Can Genius Sports Raise More Cash Easily?
There's no doubt Genius Sports seems to be in a fairly good position, when it comes to managing its cash burn, but even if it's only hypothetical, it's always worth asking how easily it could raise more money to fund growth. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. Many companies end up issuing new shares to fund future 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.
Since it has a market capitalisation of US$1.1b, Genius Sports' US$32m in cash burn equates to about 2.9% of its market value. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.
So, Should We Worry About Genius Sports' Cash Burn?
As you can probably tell by now, we're not too worried about Genius Sports' cash burn. For example, we think its cash burn relative to its market cap suggests that the company is on a good path. And even though its cash burn reduction wasn't quite as impressive, it was still a positive. It's clearly very positive to see that analysts are forecasting the company will break even fairly soon. After considering a range of factors in this article, we're pretty relaxed about its cash burn, since the company seems to be in a good position to continue to fund its growth. Taking an in-depth view of risks, we've identified 1 warning sign for Genius Sports that you should be aware of before investing.
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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