Companies Like Tai Kam Holdings (HKG:8321) Are In A Position To Invest In Growth

We can readily understand why investors are attracted to unprofitable companies. For example, Tai Kam Holdings (HKG:8321) shareholders have done very well over the last year, with the share price soaring by 240%. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

In light of its strong share price run, we think now is a good time to investigate how risky Tai Kam Holdings' cash burn is. For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

How Long Is Tai Kam Holdings' Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When Tai Kam Holdings last reported its April 2025 balance sheet in August 2025, it had zero debt and cash worth HK$24m. Importantly, its cash burn was HK$11m over the trailing twelve months. Therefore, from April 2025 it had 2.3 years of cash runway. That's decent, giving the company a couple years to develop its business. You can see how its cash balance has changed over time in the image below.

See our latest analysis for Tai Kam Holdings

Is Tai Kam Holdings' Revenue Growing?

We're hesitant to extrapolate on the recent trend to assess its cash burn, because Tai Kam Holdings actually had positive free cash flow last year, so operating revenue growth is probably our best bet to measure, right now. While it's not that amazing, we still think that the 6.3% increase in revenue from operations was a positive. In reality, this article only makes a short study of the company's growth data. You can take a look at how Tai Kam Holdings has developed its business over time by checking this visualization of its revenue and earnings history.

How Easily Can Tai Kam Holdings Raise Cash?

While Tai Kam Holdings is showing solid revenue growth, 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. Many companies end up issuing new shares to fund future 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.

Tai Kam Holdings has a market capitalisation of HK$222m and burnt through HK$11m last year, which is 4.8% of the company's market value. Given that is a rather small percentage, it would probably be really easy for the company to fund another year's growth by issuing some new shares to investors, or even by taking out a loan.

So, Should We Worry About Tai Kam Holdings' Cash Burn?

As you can probably tell by now, we're not too worried about Tai Kam Holdings' cash burn. For example, we think its cash burn relative to its market cap suggests that the company is on a good path. On this analysis its revenue growth was its weakest feature, but we are not concerned about it. 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. Taking a deeper dive, we've spotted 3 warning signs for Tai Kam Holdings you should be aware of, and 2 of them are a bit unpleasant.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies with significant insider holdings, and this list of stocks growth stocks (according to analyst forecasts)

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.