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. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

Given this risk, we thought we'd take a look at whether Twist Bioscience (NASDAQ:TWST) shareholders should 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'. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

See our latest analysis for Twist Bioscience

Does Twist Bioscience Have A Long Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When Twist Bioscience last reported its September 2024 balance sheet in November 2024, it had zero debt and cash worth US$276m. In the last year, its cash burn was US$69m. That means it had a cash runway of about 4.0 years as of September 2024. Importantly, analysts think that Twist Bioscience will reach cashflow breakeven in 5 years. Essentially, that means the company will either reduce its cash burn, or else require more cash. You can see how its cash balance has changed over time in the image below.

How Well Is Twist Bioscience Growing?

Twist Bioscience managed to reduce its cash burn by 59% over the last twelve months, which suggests it's on the right flight path. And revenue is up 28% in that same period; also a good sign. We think it is growing rather well, upon reflection. 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 Twist Bioscience To Raise More Cash For Growth?

We are certainly impressed with the progress Twist Bioscience has made over the last year, but it is also worth considering how costly it would be if it wanted to raise more cash to fund 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. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund 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).

Twist Bioscience's cash burn of US$69m is about 2.4% of its US$2.9b market capitalisation. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.

So, Should We Worry About Twist Bioscience's Cash Burn?

As you can probably tell by now, we're not too worried about Twist Bioscience's cash burn. For example, we think its cash runway suggests that the company is on a good path. But it's fair to say that its revenue growth was also very reassuring. Shareholders can take heart from the fact that analysts are forecasting it will reach breakeven. After considering a range of factors in this article, we're pretty relaxed about its cash burn, since the company seems to be in a good position to continue to fund its growth. Taking an in-depth view of risks, we've identified 3 warning signs for Twist Bioscience that you should be aware of before investing.

Of course Twist Bioscience may not be the best stock to buy. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.