It is easy to understand why investors are attracted to unprofitable companies. For example, although Amazon.com suffered losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. But while history praises these rare successes, those that fail are often forgotten; who remembers Pets.com?
So the natural question for Safe-T Group (TLV: SFET) is whether they should be concerned about its rate of cash consumption. In this report, we will consider the company’s annual negative free cash flow, which we now call “cash burn”. Let’s start with a review of the company’s cash flow, relative to its cash consumption.
Check out our latest review for Safe-T Group
When could the Safe-T group run out of money?
A cash flow trail is defined as the time it would take a business to run out of cash if it continued to spend at its current rate of cash consumption. As of March 2021, Safe-T Group had US $ 22 million in cash and was debt free. Importantly, his cash consumption was US $ 6.8 million in the past twelve months. This means he had a cash trail of around 3.2 years as of March 2021. There is no doubt that this is a reassuringly long trail. You can see how her cash balance has changed over time in the image below.
How is the Safe-T group growing?
Over the past year, Safe-T Group has maintained its cash consumption at a fairly stable level. It’s not too bad, but his 30% revenue growth was definitely positive. Overall, we would say the business is improving over time. Of course, we’ve only taken a quick look at the stock’s growth indicators here. You can see how Safe-T Group is increasing its revenue over time by viewing this visualization of past revenue growth.
How easily can Safe-T Group raise funds?
We’re certainly impressed with the progress Safe-T Group has made over the past year, but it’s also worth considering how expensive it would be to raise more cash to fund faster growth. Businesses can raise capital through debt or equity. One of the main advantages of publicly traded companies is that they can sell stocks to investors to raise funds and finance their growth. We can compare a company’s cash consumption to its market capitalization to get an idea of how many new shares a company would need to issue to fund its one-year operations.
Safe-T Group’s cash consumption of US $ 6.8 million represents approximately 17% of its market capitalization of US $ 40 million. Given this situation, it’s fair to say that the company wouldn’t have much trouble raising more cash for growth, but shareholders would be somewhat diluted.
How risky is the Safe-T Group’s cash position?
The good news is that in our opinion, Safe-T Group’s cash burn situation gives shareholders real reason to be optimistic. Not only was his revenue growth pretty good, but his cash flow track was really positive. Based on the factors mentioned in this article, we believe its cash-consuming situation deserves some attention from shareholders, but we don’t think they should be worried. By diving deeper, we spotted 2 warning signs for Safe-T Group you need to be aware of it, and one of them is important.
Of course, you might find a fantastic investment looking elsewhere. So take a look at this free list of interesting companies, and this list of growth stocks (according to analysts’ forecasts)
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