There's no doubt that money can be made by owning shares of unprofitable businesses. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. 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.
Given this risk, we thought we'd take a look at whether Seattle Genetics (NASDAQ:SGEN) 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. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.
View our latest analysis for Seattle Genetics
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. When Seattle Genetics last reported its balance sheet in June 2019, it had zero debt and cash worth US$376m. Looking at the last year, the company burnt through US$172m. That means it had a cash runway of about 2.2 years as of June 2019. Importantly, though, analysts think that Seattle Genetics will reach cashflow breakeven before then. If that happens, then the length of its cash runway, today, would become a moot point. Depicted below, you can see how its cash holdings have changed over time.
NasdaqGS:SGEN Historical Debt, October 21st 2019
On balance, we think it's mildly positive that Seattle Genetics trimmed its cash burn by 4.3% over the last twelve months. On top of that, operating revenue was up 32%, making for a heartening combination Considering the factors above, the company doesnt 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.
Seattle Genetics seems to be in a fairly good position, in terms of cash burn, but we still think it's worthwhile considering how easily it could raise more money if it wanted to. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. Commonly, a business will sell new shares in itself to raise cash to 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).
Seattle Genetics has a market capitalisation of US$15b and burnt through US$172m last year, which is 1.2% of the company's market value. So it could almost certainly just borrow a little to fund another year's growth, or else easily raise the cash by issuing a few shares.
It may already be apparent to you that we're relatively comfortable with the way Seattle Genetics is burning through its cash. In particular, we think its cash burn relative to its market cap stands out as evidence that the company is well on top of its spending. Its weak point is its cash burn reduction, but even that wasn't too bad! It's clearly very positive to see that analysts are forecasting the company will break even fairly soon Taking all the factors in this report into account, we're not at all worried about its cash burn, as the business appears well capitalized to spend as needs be. Notably, our data indicates that Seattle Genetics insiders have been trading the shares. You can discover if they are buyers or sellers by clicking on this link.
Story continues
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)
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
- Is ALS Hereditary? Genetics, Inheritance Patterns, and More - Healthline - May 5th, 2024
- Leveraging functional genomic annotations and genome coverage to improve polygenic prediction of complex traits ... - Nature.com - May 5th, 2024
- Genetic association of inflammatory marker GlycA with lung function and respiratory diseases - Nature.com - May 5th, 2024
- Exome sequencing reveals genetic heterogeneity and clinically actionable findings in children with cerebral palsy - Nature.com - May 5th, 2024
- Investigation of inherited noncoding genetic variation impacting the pharmacogenomics of childhood acute ... - Nature.com - May 5th, 2024
- Pitfalls in the genetic testing of the OPN1LW-OPN1MW gene cluster in human subjects | npj Genomic Medicine - Nature.com - May 5th, 2024
- Reply to: Pitfalls in the genetic testing of the OPN1LW-OPN1MW gene cluster in human subjects | npj Genomic Medicine - Nature.com - May 5th, 2024
- Lifespan is influenced more by lifestyle than genetics - Earth.com - May 5th, 2024
- Scientists discover over 100 new genomic regions linked to blood pressure - National Institutes of Health (NIH) (.gov) - May 5th, 2024
- Genetics studies have a diversity problem that researchers struggle to fix - The Lund Report - May 5th, 2024
- Researchers discover the genetic cause of the most common brain malformation - EL PAS USA - May 5th, 2024
- Genetic link between adolescent drinking and adult anxiety may offer therapy target | UIC today - UIC Today - May 5th, 2024
- Phylogenomics and genetic analysis of solvent-producing Clostridium species | Scientific Data - Nature.com - May 5th, 2024
- New genes are involved in the adaptation of acorn barnacles to sessile life - Nature.com - May 5th, 2024
- Rachel Khong explores genetics, race and the idea of being American in new novel - Wyoming Public Media - May 5th, 2024
- Genetic testing led to early cancer detection for father, daughter - Roswell Park Comprehensive Cancer Center - May 5th, 2024
- EYE ON HEALTH: High risk and genetic testing being offered at local hospital - Local 3 News - May 5th, 2024
- Fatty Liver: Is It Hereditary? - Healthline - May 5th, 2024
- Southern Seven Health Department to expand genetic cancer testing - KFVS - May 5th, 2024
- Genetic associations of key genes in breast cancer pathogenesis - News-Medical.Net - May 5th, 2024
- Mating Study Unlocks the Genetic Code of Attraction - Neuroscience News - March 18th, 2024
- Mindfulness in your DNA? Capacity to be present is partly a function of genetics, study finds - PsyPost - March 18th, 2024
- Genetic testing scam targets Medicare recipients, including those in Spokane - KXLY Spokane - March 18th, 2024
- Some people are genetically predisposed to gain weight. These 5 tips can help - CNN - March 18th, 2024
- SOPHiA GENETICS and The French Kidney Cancer Research Network (UroCCR) Publish Results from Multiyear ... - PR Newswire - March 18th, 2024
- Tissue samples show the deep genetic and cellular impacts of smoking - Medical Xpress - March 18th, 2024
- The regulatory landscape of chromatin accessibility - Nature.com - March 18th, 2024
- Genome assemblies of 11 bamboo species highlight diversification induced by dynamic subgenome dominance - Nature.com - March 18th, 2024
- Research reveals the genetic code behind non-identical twins - Medical Xpress - March 18th, 2024
- How genetic therapies transformed the lives of sickle cell patients - KPVI News 6 - March 18th, 2024
- The Next Wave of Privacy Litigation: The Illinois Genetic Information Privacy Act - Perkins Coie - March 18th, 2024
- State initiates study on genetic cancers, Lynch Syndrome - The Times of India - March 18th, 2024
- How genetic therapies transformed the lives of sickle cell patients - Citizentribune - March 18th, 2024
- Dr Plichta on Areas of Interest for Genetic Testing Research in Breast Cancer - OncLive - March 18th, 2024
- The Genetic History of the Jews Mosaic - Mosaic - March 18th, 2024
- New insights into genetic mechanisms could improve treatment of liver fibrosis - Medical Xpress - March 18th, 2024
- 5 Questions To Ask About The Ethics Of Genetic Data - Forbes - March 18th, 2024
- Couple raising money to fix sons club feet caused by rare genetic condition - 21 Alive News - February 18th, 2024
- What can bulls tell us about men? Genetic discovery could translate to human fertility research - Medical Xpress - February 18th, 2024
- Legislation seeks to bar life insurance companies from purchasing recreational genetic testing data - Delaware First Media - February 18th, 2024
- Family-based study identifies potential new genetic factors linked to Alzheimer's risk in people with African ancestry - National Institute on Aging - February 18th, 2024
- Genetic determinants of micronucleus formation in vivo - Nature.com - February 18th, 2024
- Near-gapless and haplotype-resolved apple genomes provide insights into the genetic basis of rootstock-induced ... - Nature.com - February 18th, 2024
- Accurate and sensitive mutational signature analysis with MuSiCal - Nature.com - February 18th, 2024
- CRISPR, the Genetic Revolution of the 21st Century | OpenMind - BBVA OpenMind - February 18th, 2024
- Genetic control of thermomorphogenesis in tomato inflorescences - Nature.com - February 18th, 2024
- Natural selection and genetic diversity maintenance in a parasitic wasp during continuous biological control application - Nature.com - February 18th, 2024
- Understanding how natural genetic variation contributes to adaptive responses to low oxygen - News-Medical.Net - February 18th, 2024
- Division of Epidemiology and Genetics - Epidemiology and Genetics - University of Southern California - February 18th, 2024
- Genetic study clarifies the link between birth weight and adult morbidity - Medical Xpress - February 18th, 2024
- AI and genetics underpin project to speed up CVD diagnosis and personalise treatment - Hospital Healthcare - February 18th, 2024
- Study Reveals Complex Interaction Between Genetics and Environment in Brain Functioning - Medriva - February 18th, 2024
- Unraveling the Impact of Genetics and Socioeconomic Status on Behavioral and Psychiatric Traits - Medriva - February 18th, 2024
- Genetic Investigation Reveals CETP Gene Variants Linked to Cardiovascular Resilience in Genome-Wide Association ... - Physician's Weekly - December 30th, 2023
- Raha Kapoor's blue eyes remind fans of her great-grandfather, Raj Kapoor; here's what genetics says - IndiaTimes - December 30th, 2023
- Genetic clue to pericarditis inflammation points to promising new treatments - News-Medical.Net - December 30th, 2023
- Certain genetic predispositions may increase risk of atrial fibrillation among those with high alcohol consumption - 2 Minute Medicine - December 30th, 2023
- Understanding the genetic basis of hereditary diffuse gastric cancer - News-Medical.Net - December 30th, 2023
- Genetic engineering was meant to save chestnut trees. Then there was a mistake. - The Washington Post - December 30th, 2023
- Unraveling the mystery of hereditary diffuse gastric cancer - EurekAlert - December 30th, 2023
- What is Genetics? | AMNH - American Museum of Natural History - December 22nd, 2023
- Who killed Shelley Connolly? Genetic genealogy leads authorities to a suspect and a conviction - Alaska's News Source - December 22nd, 2023
- C.S. Lewis, Atheism, and the Genetic Fallacy - Word on Fire - December 22nd, 2023
- FDA approves first genetic test to assess opioid addiction risk using DNA sample - Fox News - December 22nd, 2023
- Genetic blueprint of wild grapes could help breed better grapes - University of California, Davis - December 22nd, 2023
- Unlocking the genetic secrets of grape seedlessness - Phys.org - December 22nd, 2023
- Unlocking the genetic secrets of drought resilience in Persian walnuts - Phys.org - December 22nd, 2023
- FDA approves genetic test to assess patients risk of developing an opioid addiction - KXAN.com - December 22nd, 2023
- How researchers are CReATiNG synthetic chromosomes faster and cheaper - EurekAlert - December 22nd, 2023
- The promise of genetic therapies in sickle cell disease - The Lancet - December 22nd, 2023
- Assessment of genetic diversity, population structure and wolf-dog hybridisation in the Eastern Romanian Carpathian ... - Nature.com - December 22nd, 2023
- Genetics and Heart Disease: What you need to know - IndiaTimes - December 22nd, 2023
- How to become a geneticist - University of Sydney - December 22nd, 2023
- Study sheds light on the ancestry and genetics of Coast Salish woolly dogs | News | Vancouver Island University ... - Vancouver Island University News - December 22nd, 2023
- Human genetics | Description, Chromosomes, & Inheritance - December 13th, 2023
- BASIC GENETICS INFORMATION - Understanding Genetics - NCBI Bookshelf - December 13th, 2023
- Introduction to Genetics - Open Textbook Library - December 13th, 2023
- Clues to preventing Alzheimer's come from patient who, despite genetics, evaded disease Washington University ... - Washington University School of... - December 13th, 2023
- Environmental stress rather than genetics influenced height differences in early Neolithic people: Study - Phys.org - December 13th, 2023
- What is trisomy 18? Why the fatal genetic disorder is in the news and what it's like to get the diagnosis. - Yahoo Life - December 13th, 2023