Here's Why We're Not At All Concerned With Circio Holding's (OB:CRNA) Cash Burn Situation
There's no doubt that money can be made by owning shares of unprofitable businesses. By way of example, Circio Holding (OB:CRNA) has seen its share price rise 1,893% over the last year, delighting many shareholders. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.
Given its strong share price performance, we think it's worthwhile for Circio Holding shareholders to consider whether its cash burn is concerning. 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.
How Long Is Circio Holding's Cash Runway?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. As at June 2026, Circio Holding had cash of kr539m and no debt. Importantly, its cash burn was kr53m over the trailing twelve months. So it had a very long cash runway of many years from June 2026. Even though this is but one measure of the company's cash burn, the thought of such a long cash runway warms our bellies in a comforting way. The image below shows how its cash balance has been changing over the last few years.
See our latest analysis for Circio Holding
How Is Circio Holding's Cash Burn Changing Over Time?
Because Circio Holding isn't currently generating revenue, we consider it an early-stage business. Nonetheless, we can still examine its cash burn trajectory as part of our assessment of its cash burn situation. With the cash burn rate up 13% in the last year, it seems that the company is ratcheting up investment in the business over time. However, the company's true cash runway will therefore be shorter than suggested above, if spending continues to increase. Admittedly, we're a bit cautious of Circio Holding due to its lack of significant operating revenues. So we'd generally prefer stocks from this list of stocks that have analysts forecasting growth.
How Hard Would It Be For Circio Holding To Raise More Cash For Growth?
Given its cash burn trajectory, Circio Holding shareholders may wish to consider how easily it could raise more cash, despite its solid cash runway. 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.
Since it has a market capitalisation of kr3.3b, Circio Holding's kr53m in cash burn equates to about 1.6% of its market value. So it could almost certainly just borrow a little to fund another year's growth, or else easily raise the cash by issuing a few shares.
Is Circio Holding's Cash Burn A Worry?
As you can probably tell by now, we're not too worried about Circio Holding's cash burn. In particular, we think its cash runway stands out as evidence that the company is well on top of its spending. Although its increasing cash burn does give us reason for pause, the other metrics we discussed in this article form a positive picture overall. Looking at all the measures in this article, together, we're not worried about its rate of cash burn; the company seems well on top of its medium-term spending needs. An in-depth examination of risks revealed 3 warning signs for Circio Holding that readers should think about before committing capital to this stock.
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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.