Just because a business does not make any money, does not mean that the stock will go down. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

So should Champions Oncology (NASDAQ:CSBR) shareholders be worried about its cash burn? In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

View our latest analysis for Champions Oncology

When Might Champions Oncology Run Out Of Money?

A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. When Champions Oncology last reported its July 2024 balance sheet in September 2024, it had zero debt and cash worth US$2.9m. Looking at the last year, the company burnt through US$2.0m. Therefore, from July 2024 it had roughly 17 months of cash runway. Importantly, though, the one analyst we see covering the stock thinks that Champions Oncology will reach cashflow breakeven before then. In that case, it may never reach the end of its cash runway. You can see how its cash balance has changed over time in the image below.

How Well Is Champions Oncology Growing?

It was fairly positive to see that Champions Oncology reduced its cash burn by 23% during the last year. Having said that, the flat operating revenue was a bit mundane. On balance, we'd say the company is improving over time. While the past is always worth studying, it is the future that matters most of all. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

How Hard Would It Be For Champions Oncology To Raise More Cash For Growth?

Even though it seems like Champions Oncology is developing its business nicely, we still like to consider how easily it could raise more money to accelerate growth. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Many companies end up issuing new shares to fund future growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).

Since it has a market capitalisation of US$65m, Champions Oncology's US$2.0m in cash burn equates to about 3.1% of its market value. That's a low proportion, so we figure the company would be able to raise more cash to fund growth, with a little dilution, or even to simply borrow some money.

Is Champions Oncology's Cash Burn A Worry?

As you can probably tell by now, we're not too worried about Champions Oncology's cash burn. In particular, we think its cash burn relative to its market cap stands out as evidence that the company is well on top of its spending. Although its falling revenue does give us reason for pause, the other metrics we discussed in this article form a positive picture overall. It's clearly very positive to see that at least one analyst is forecasting the company will break even fairly soon. Looking at all the measures in this article, together, we're not worried about its rate of cash burn, which seems to be under control. Its important for readers to be cognizant of the risks that can affect the company's operations, and we've picked out 2 warning signs for Champions Oncology that investors should know when investing in the stock.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies, 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.