We're Keeping An Eye On Next Hydrogen Solutions' (CVE:NXH) Cash Burn Rate

  • In Business
  • 2022-12-26 14:35:18Z
  • By Simply Wall St.

Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.

So should Next Hydrogen Solutions (CVE:NXH) 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'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

Check out our latest analysis for Next Hydrogen Solutions

When Might Next Hydrogen Solutions Run Out Of Money?

A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. As at September 2022, Next Hydrogen Solutions had cash of CA$26m and such minimal debt that we can ignore it for the purposes of this analysis. Looking at the last year, the company burnt through CA$18m. Therefore, from September 2022 it had roughly 17 months of cash runway. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. Depicted below, you can see how its cash holdings have changed over time.

How Is Next Hydrogen Solutions' Cash Burn Changing Over Time?

Whilst it's great to see that Next Hydrogen Solutions has already begun generating revenue from operations, last year it only produced CA$201k, so we don't think it is generating significant revenue, at this point. Therefore, for the purposes of this analysis we'll focus on how the cash burn is tracking. During the last twelve months, its cash burn actually ramped up 83%. Oftentimes, increased cash burn simply means a company is accelerating its business development, but one should always be mindful that this causes the cash runway to shrink. Clearly, however, the crucial factor is whether the company will grow its business going forward. So you might want to take a peek at how much the company is expected to grow in the next few years.

How Easily Can Next Hydrogen Solutions Raise Cash?

While Next Hydrogen Solutions does have a solid cash runway, its cash burn trajectory may have some shareholders thinking ahead to when the company may need to raise more cash. 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. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.

Next Hydrogen Solutions has a market capitalisation of CA$27m and burnt through CA$18m last year, which is 67% of the company's market value. Given how large that cash burn is, relative to the market value of the entire company, we'd consider it to be a high risk stock, with the real possibility of extreme dilution.

How Risky Is Next Hydrogen Solutions' Cash Burn Situation?

Even though its cash burn relative to its market cap makes us a little nervous, we are compelled to mention that we thought Next Hydrogen Solutions' cash runway was relatively promising. After looking at that range of measures, we think shareholders should be extremely attentive to how the company is using its cash, as the cash burn makes us uncomfortable. Separately, we looked at different risks affecting the company and spotted 2 warning signs for Next Hydrogen Solutions (of which 1 doesn't sit too well with us!) you should know about.

Of course Next Hydrogen Solutions 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 that insiders are buying.

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.

Join A Paid User Research Session
You'll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here


More Related News

Mincor Resources NL (ASX:MCR) Shares Could Be 47% Below Their Intrinsic Value Estimate
Mincor Resources NL (ASX:MCR) Shares Could Be 47% Below Their Intrinsic Value Estimate

Does the January share price for Mincor Resources NL ( ASX:MCR ) reflect what it's really worth? Today, we will...

Calculating The Fair Value Of Hong Fok Corporation Limited (SGX:H30)
Calculating The Fair Value Of Hong Fok Corporation Limited (SGX:H30)

Today we will run through one way of estimating the intrinsic value of Hong Fok Corporation Limited ( SGX:H30 ) by...

A Look At The Fair Value Of Carzo Holdings Berhad (KLSE:CARZO)
A Look At The Fair Value Of Carzo Holdings Berhad (KLSE:CARZO)

How far off is Carzo Holdings Berhad ( KLSE:CARZO ) from its intrinsic value? Using the most recent financial data...

Are Investors Undervaluing Sensata Technologies Holding plc (NYSE:ST) By 26%?
Are Investors Undervaluing Sensata Technologies Holding plc (NYSE:ST) By 26%?

In this article we are going to estimate the intrinsic value of Sensata Technologies Holding plc ( NYSE:ST ) by...

Estimating The Intrinsic Value Of Altitude Group plc (LON:ALT)
Estimating The Intrinsic Value Of Altitude Group plc (LON:ALT)

How far off is Altitude Group plc ( LON:ALT ) from its intrinsic value? Using the most recent financial data, we'll...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply


  • 안전놀이터
    (2022-12-27 07:36:42Z)

    I found so many interesting stuff in your blog especially its discussion. From the tons of comments on your articles, I guess I am not the only one having all the enjoyment here! keep up the good work...안전놀이터

  • raja slot
    (2022-12-27 10:33:43Z)

    This is the reason it really is greater you could important examination before creating. It will be possible to create better write-up like this.

  • here
    (2022-12-27 12:24:04Z)

    Professional logo and Firmenlogo erstellen lassen animations for companies and individuals from all over Switzerland Contact us now.Please Click and visit our website for more detail.

  • our ocean 2018
    (2022-12-27 12:37:17Z)

    As soon as we obtained on your web site despite the fact that obtaining thing to consider essentially fairly little bit submits. Enjoyable technique for forthcoming, I'm book-marking simultaneously obtain types finish increases up-wards.

  • Directorio Neocities
    (2022-12-28 07:52:29Z)

    Thanks, I was doing a google search and your site came up for homes for rent in Altamonte Springs, FL but anyway, I have enjoyed reading it, keep it up!

  • where to get lsd
    (2022-12-28 08:01:34Z)

    When I initially commented I clicked the -Notify me when new comments are added- checkbox and now every time a remark is added I get four emails with the identical comment. Is there any way you’ll be able to take away me from that service? Thanks!

  • Email
    (2023-01-18 05:50:23Z)

    Muchas gracias por este maravilloso escrito. Me interesan mucho tus publicaciones y me ayudan mucho. Sigue haciendo el gran trabajo. Seguro que siempre estaré pendiente de tus trabajos, gracias.

  • Annemnani
    (2023-01-26 20:03:17Z)

    The clinical distinction usually is straightforward With rare exception, central causes such as strokes or tumors spare the forehead generic name for cialis


Top News: Business