Just because a company isn’t making money doesn’t mean the stock will go down. For example, although Amazon.com posted losses for many years after it listed, if you had bought and held the stock since 1999, you would have made a fortune. But while history boasts of these rare successes, those who fail are often forgotten; who remembers Pets.com?
So the natural question for Tyra Biosciences (NASDAQ:TYRA) shareholders is whether they should be concerned about its cash burn rate. 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. The first step is to compare its cash consumption with its cash reserves, to give us its “cash trail”.
Our analysis indicates that TYRA is potentially overpriced!
When could Tyra Biosciences run out of money?
You can calculate a company’s cash trail by dividing the amount of cash it has on hand by the rate at which it spends that money. As of September 2022, Tyra Biosciences had cash of US$263 million and no debt. Last year, its cash burn was $48 million. Therefore, as of September 2022, it had 5.5 years of cash trail. While this is just a measure of its cash burn situation, it certainly gives us the impression that holders have nothing to worry about. You can see how his cash balance has changed over time in the image below.
How is Tyra Biosciences cash burn changing over time?
Tyra Biosciences has not recorded any revenue in the last year, indicating that it is a start-up company that is still growing its business. Nonetheless, we can still look at its cash burn trajectory as part of our assessment of its cash burn situation. Soaring cash burn of 168% year over year is certainly testing our nerves. This type of increase in spending is undoubtedly intended to generate attractive long-term returns. Obviously, however, the crucial factor is whether the company will expand its business in the future. For this reason, it makes a lot of sense to take a look at our analysts’ forecasts for the company.
Can Tyra Biosciences raise more money easily?
Although Tyra Biosciences has a strong cash trail, its cash burn trajectory may cause some shareholders to think ahead to when the company might need to raise more cash. In general, a listed company can raise new funds by issuing shares or by going into debt. Typically, a company will sell new stock on its own to raise cash and drive 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.
Tyra Biosciences’ cash burn of US$48 million is about 15% of its market capitalization of US$330 million. As a result, we risk the company being able to raise more cash for growth without too much trouble, but at the cost of some dilution.
Is Tyra Biosciences’ cash burn a concern?
On this analysis of Tyra Biosciences’ cash burn, we think its cash trail was reassuring, while its growing cash burn worries us a bit. Based on the factors mentioned in this article, we think its cash burn situation warrants some attention from shareholders, but we don’t think they should be concerned. On another note, Tyra Biosciences has 5 warning signs (and 2 that are significant) that we think you should know about.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.