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    Companies Like Li-S Energy (ASX:LIS) Are In A Position To Invest In Growth

    Simply Wall St·08/26/2026 20:32:15
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    We can readily understand why investors are attracted to unprofitable companies. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

    So should Li-S Energy (ASX:LIS) 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'. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

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    How Long Is Li-S Energy's 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. When Li-S Energy last reported its June 2026 balance sheet in August 2026, it had zero debt and cash worth AU$15m. Importantly, its cash burn was AU$7.2m over the trailing twelve months. Therefore, from June 2026 it had 2.1 years of cash runway. That's decent, giving the company a couple years to develop its business. The image below shows how its cash balance has been changing over the last few years.

    debt-equity-history-analysis
    ASX:LIS Debt to Equity History August 26th 2026

    View our latest analysis for Li-S Energy

    How Is Li-S Energy's Cash Burn Changing Over Time?

    Because Li-S Energy isn't currently generating revenue, we consider it an early-stage business. So while we can't look to sales to understand growth, we can look at how the cash burn is changing to understand how expenditure is trending over time. While it hardly paints a picture of imminent growth, the fact that it has reduced its cash burn by 24% over the last year suggests some degree of prudence. Li-S Energy makes us a little nervous due to its lack of substantial operating revenue. So we'd generally prefer stocks from this list of stocks that have analysts forecasting growth.

    Can Li-S Energy Raise More Cash Easily?

    Even though it has reduced its cash burn recently, shareholders should still consider how easy it would be for Li-S Energy to raise more cash in the future. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund 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.

    Li-S Energy's cash burn of AU$7.2m is about 7.6% of its AU$95m market capitalisation. 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 Li-S Energy's Cash Burn A Worry?

    As you can probably tell by now, we're not too worried about Li-S Energy'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. Its cash burn reduction wasn't quite as good, but was still rather encouraging! 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 worried. On another note, Li-S Energy has 4 warning signs (and 2 which are potentially serious) we think you should know about.

    Of course Li-S Energy 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.