Just because a company isn’t making money doesn’t mean the stock will go down. For example, although software-as-a-service company Salesforce.com lost money for years as it grew recurring revenue, if you had held stock since 2005, you would have done very well. But the harsh reality is that many, many loss-making companies burn all their money and go bankrupt.
So should Brazing (NASDAQ:BRZE) Are shareholders worried about its cash burn? In this report, we will consider the company’s negative annual free cash flow, which we will now refer to as “cash burn”. The first step is to compare its cash consumption with its cash reserves, to give us its “cash trail”.
When could Braze run out of money?
A company’s cash trail is calculated by dividing its cash hoard by its cash burn. As of July 2022, Braze had cash of US$507 million and no debt. Importantly, its cash burn was US$38 million over the last twelve months. This means that he had a cash trail of many, many years from July 2022. While this is only a measure of his cash burn situation, it certainly gives us the impression that the holders have nothing to fear. Below you can see how its liquidity has changed over time.
How is Braze growing?
Notably, Braze has actually increased its cash burn very hard and fast over the past year, by 116%, which signifies a significant investment in the business. While this certainly gives us food for thought, we are very reassured by the strong annual revenue growth of 60%. Overall, we would say the company is improving over time. While the past is always worth studying, it is the future that matters most. So you might want to take a look at how much the business is expected to grow in the next few years.
How easily can Braze raise funds?
We’re certainly impressed with the progress Braze has made over the past year, but it’s also worth considering how much it would cost if it wanted to raise more cash to fund faster growth. In general, a listed company can raise new funds by issuing shares or by going into debt. One of the main advantages of publicly traded companies is that they can sell shares to investors to raise funds and finance their growth. By looking at a company’s cash burn relative to its market cap, we get insight into how much of a shareholder base would be diluted if the company needed to raise enough cash to cover a company’s cash burn. another year.
Braze’s cash burn of US$38 million represents approximately 1.4% of its market capitalization of US$2.8 billion. So he could almost certainly borrow a little to fund another year’s growth, or he could easily raise cash by issuing a few shares.
How risky is Braze’s cash burn situation?
It might already be obvious to you that we’re relatively comfortable with how Braze spends its money. For example, we think its revenue growth suggests the company is on the right track. While it must be admitted that its growing cash burn is a bit worrying, the other factors mentioned in this article provide great comfort when it comes to cash burn. After considering the various metrics mentioned in this report, we’re pretty comfortable with how the company is spending its money, as it appears to be on track to meet its medium-term needs. On a different note, we conducted a thorough investigation of the company and identified 3 warning signs for Braze (1 makes us a little uneasy!) that you should be aware of before investing here.
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