Even when a company loses money, it is possible for shareholders to make money if they buy a good company at the right price. For exemple, Infinity Pharmaceuticals (NASDAQ: INFI) has seen its stock price rise 198% in the past year, delighting many shareholders. But while the successes are well known, investors shouldn’t ignore the myriad of unprofitable companies that simply burn all their money and collapse.
Given the strong performance of its share price, we believe it is worthwhile for Infinity Pharmaceuticals shareholders to consider whether its cash consumption is of concern. 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 Infinity Pharmaceuticals
How long is the Infinity Pharmaceuticals cash flow track?
A company’s cash trail is the time it would take to deplete its cash reserves at its current rate of cash consumption. As of March 2021, Infinity Pharmaceuticals had US $ 107 million in cash and was debt free. Importantly, his cash consumption was US $ 37 million in the past twelve months. This means he had a cash trail of around 2.9 years in March 2021. It’s arguably a prudent and reasonable runway length to have. The image below shows how her cash balance has evolved over the past few years.
How well is Infinity Pharmaceuticals growing?
Overall, we think it is slightly positive that Infinity Pharmaceuticals has reduced its cash consumption by 6.2% over the past twelve months. On top of that, operating revenue rose 32%, making it an encouraging combination. Overall we would say the business improves over time. If the past is always worth studying, it is the future that matters most. For this reason, it makes a lot of sense to take a look at our analyst forecast for the company.
Can Infinity Pharmaceuticals Easily Raise More Money?
There is no doubt that Infinity Pharmaceuticals appears to be in a good enough position to manage its cash consumption, but even if it is only hypothetical, it is still worth wondering how easily it could raise more money. money to finance growth. Businesses can raise capital through debt or equity. Many companies end up issuing new shares to finance their future growth. By looking at a company’s cash consumption relative to its market capitalization, we get an idea of how many shareholders would be diluted if the company were to raise enough cash to cover another year’s cash consumption.
Since it has a market capitalization of US $ 227 million, Infinity Pharmaceuticals’ US $ 37 million of cash consumption is equivalent to approximately 17% of its market value. As a result, we venture to think that the company could raise more cash for growth without too many problems, albeit at the cost of some dilution.
Is Infinity Pharmaceuticals Silver Consumption a Problem?
The good news is that we believe Infinity Pharmaceuticals’ cash position gives shareholders real cause for optimism. 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. Separately, we examined different risks affecting the business and identified 4 warning signs for Infinity Pharmaceuticals (1 of which is potentially serious!) that you should be aware of.
Of course Infinity Pharmaceuticals May Not Be The Best Stock To Buy. So you might want to see this free a set of companies with a high return on equity, or that list of stocks that insiders buy.
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