Yahoo Finance Is Oneview Healthcare (ASX:ONE) In A Good Position To Deliver On Growth Plans?
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. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.
So, the natural question for Oneview Healthcare (ASX:ONE) shareholders is whether they should be concerned by its rate of cash burn. In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.
See our latest analysis for Oneview Healthcare
Does Oneview Healthcare Have A Long Cash Runway?
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. In June 2022, Oneview Healthcare had €10m in cash, and was debt-free. In the last year, its cash burn was €7.2m. Therefore, from June 2022 it had roughly 17 months of cash runway. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. The image below shows how its cash balance has been changing over the last few years.
How Well Is Oneview Healthcare Growing?
Oneview Healthcare boosted investment sharply in the last year, with cash burn ramping by 50%. On the bright side, at least operating revenue was up 37% over the same period, giving some cause for hope. On balance, we'd say the company is improving over time. Of course, we've only taken a quick look at the stock's growth metrics, here. You can take a look at how Oneview Healthcare is growing revenue over time by checking this visualization of past revenue growth.
How Hard Would It Be For Oneview Healthcare To Raise More Cash For Growth?
While Oneview Healthcare seems to be in a fairly good position, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Commonly, a business will sell new shares in itself to raise cash and drive growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.
Oneview Healthcare's cash burn of €7.2m is about 18% of its €40m market capitalisation. As a result, we'd venture that the company could raise more cash for growth without much trouble, albeit at the cost of some dilution.
Is Oneview Healthcare's Cash Burn A Worry?
On this analysis of Oneview Healthcare's cash burn, we think its revenue growth was reassuring, while its increasing cash burn has us a bit worried. Even though we don't think it has a problem with its cash burn, the analysis we've done in this article does suggest that shareholders should give some careful thought to the potential cost of raising more money in the future. Readers need to have a sound understanding of business risks before investing in a stock, and we've spotted 3 warning signs for Oneview Healthcare that potential shareholders should take into account before putting money into a stock.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies insiders are buying, and this list of stocks growth stocks (according to analyst forecasts)
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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