We Think Greentronics Technology Berhad (KLSE:GREENTEC) Needs To Drive Business Growth Carefully
Just because a business does not make any money, does not mean that the stock will go down. By way of example, Greentronics Technology Berhad (KLSE:GREENTEC) has seen its share price rise 155% over the last year, delighting many shareholders. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.
So notwithstanding the buoyant share price, we think it's well worth asking whether Greentronics Technology Berhad's cash burn is too risky. In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.
Does Greentronics Technology Berhad Have A Long 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. As at June 2026, Greentronics Technology Berhad had cash of RM16m and such minimal debt that we can ignore it for the purposes of this analysis. In the last year, its cash burn was RM32m. So it had a cash runway of approximately 6 months from June 2026. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. Depicted below, you can see how its cash holdings have changed over time.
See our latest analysis for Greentronics Technology Berhad
How Well Is Greentronics Technology Berhad Growing?
Some investors might find it troubling that Greentronics Technology Berhad is actually increasing its cash burn, which is up 2.6% in the last year. It's even more troubling to see that operating revenue fell 55% during the period. Taken together, we think these growth metrics are a little worrying. Of course, we've only taken a quick look at the stock's growth metrics, here. This graph of historic earnings and revenue shows how Greentronics Technology Berhad is building its business over time.
How Hard Would It Be For Greentronics Technology Berhad To Raise More Cash For Growth?
Greentronics Technology Berhad revenue is declining and its cash burn is increasing, so many may be considering its need 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.
Greentronics Technology Berhad's cash burn of RM32m is about 14% of its RM229m market capitalisation. Given that situation, it's fair to say the company wouldn't have much trouble raising more cash for growth, but shareholders would be somewhat diluted.
How Risky Is Greentronics Technology Berhad's Cash Burn Situation?
Even though its cash runway makes us a little nervous, we are compelled to mention that we thought Greentronics Technology Berhad's cash burn relative to its market cap was relatively promising. Considering all the measures mentioned in this report, we reckon that its cash burn is fairly risky, and if we held shares we'd be watching like a hawk for any deterioration. Taking a deeper dive, we've spotted 4 warning signs for Greentronics Technology Berhad you should be aware of, and 1 of them shouldn't be ignored.
If you would prefer to check out another company with better fundamentals, then do not miss this free list of interesting companies, that have HIGH return on equity and low debt or this list of stocks which are all forecast to grow.
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.