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. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.
Given this risk, we thought we'd take a look at whether Manganese X Energy (CVE:MN) shareholders should be worried about its cash burn. For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.
How Long Is Manganese X Energy'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. When Manganese X Energy last reported its balance sheet in June 2021, it had zero debt and cash worth CA$4.8m. In the last year, its cash burn was CA$3.4m. Therefore, from June 2021 it had roughly 17 months of cash runway. That's not too bad, but it's fair to say the end of the cash runway is in sight, unless cash burn reduces drastically. The image below shows how its cash balance has been changing over the last few years.
How Is Manganese X Energy's Cash Burn Changing Over Time?
Manganese X Energy didn't record any revenue over the last year, indicating that it's an early...
Read Full Story: https://simplywall.st/stocks/ca/materials/tsxv-mn/manganese-x-energy-shares/news/is-manganese-x-energy-cvemn-in-a-good-position-to-invest-in
Your content is great. However, if any of the content contained herein violates any rights of yours, including those of copyright, please contact us immediately by e-mail at media[@]kissrpr.com.
