Companies Like intelliHR (ASX:IHR) Are In A Position To Invest In Growth

Simply Wall St
·4 min read

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. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

Given this risk, we thought we'd take a look at whether intelliHR (ASX:IHR) shareholders should be worried about its cash burn. For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. Let's start with an examination of the business' cash, relative to its cash burn.

View our latest analysis for intelliHR

Does intelliHR Have A Long Cash Runway?

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. In December 2020, intelliHR had AU$6.9m in cash, and was debt-free. Importantly, its cash burn was AU$4.2m over the trailing twelve months. Therefore, from December 2020 it had roughly 20 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.

debt-equity-history-analysis
debt-equity-history-analysis

How Is intelliHR's Cash Burn Changing Over Time?

Whilst it's great to see that intelliHR has already begun generating revenue from operations, last year it only produced AU$1.7m, 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. With cash burn dropping by 7.1% it seems management feel the company is spending enough to advance its business plans at an appropriate pace. Of course, we've only taken a quick look at the stock's growth metrics, here. This graph of historic revenue growth shows how intelliHR is building its business over time.

How Hard Would It Be For intelliHR To Raise More Cash For Growth?

While intelliHR is showing a solid reduction in its cash burn, 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. Commonly, a business will sell new shares in itself to raise cash and drive growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).

intelliHR's cash burn of AU$4.2m is about 5.5% of its AU$76m 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.

So, Should We Worry About intelliHR's Cash Burn?

The good news is that in our view intelliHR's cash burn situation gives shareholders real reason for optimism. Not only was its cash runway quite good, but its cash burn relative to its market cap was a real positive. 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, intelliHR has 5 warning signs (and 1 which is a bit concerning) we think you should know about.

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.

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.

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

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting

Recommended Stories

  • Daily Crunch: Alerzo lands $10.5 million Series A for digitizing Nigeria's mom-and-pop stores

    The week is finished, but our work to catch up with the torrent of technology, startup and venture capital news is not. Today we have software companies investing in hotels, profitable scooters, at-home rowing machines and TikTok radio? Microsoft backs OYO: A while back TechCrunch broke the news that Microsoft might back Indian hotel upstart OYO.

  • 10 Best Dividend Stocks with Over 5% Yield According to Hedge Funds

    In this article, we will be taking a look at the 10 best dividend stocks with over 5% yield according to hedge funds. To skip our detailed analysis of dividend investing, you can go directly to see the 5 Best Dividend Stocks with Over 5% Yield According to Hedge Funds. As the COVID-19 pandemic continues […]

  • Why Bitcoin, Ethereum, and Dogecoin Are All Soaring Today

    Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and Dogecoin (CRYPTO: DOGE) are up 6.82%, 8.16%, and 8.36% in the past 24 hours. Earlier in the day, Coinbase Global (NASDAQ: COIN), the second-largest cryptocurrency exchange in the world, announced it would be adding $500 million worth of cryptocurrency to its balance sheet. Coinbase stock is also up 3.10% to $255.98 per share in the same period.

  • Billionaire John Paulson Goes Big on These 2 High-Yield Dividend Stocks

    Every retail investor wants to ensure a solid portfolio return. The only question is, how? The stock market produces a vast mine of data, that by its nature forms a barrier to access. Some investors take a path of low resistance, and follow one or more market legends. These legends are the giants of the investing world, people like John Paulson. Paulson got his start in hedge management in 1994 with $2 million worth of initial capital. He was successful, and by 2003 he was managing $300 million

  • 4 Stocks Billionaires Bought Hand Over Fist in the Second Quarter

    Earlier this week marked the deadline for institutional investment firms, hedge funds, and the ultra-rich to file Form 13F with the Securities and Exchange Commission (SEC). Although it's a dated snapshot that can be at least six weeks old at the time of the SEC filing, it still provides insight into the stocks and trends billionaire money managers might be chasing or shying away from. After poring over 13F data from aggregator WhaleWisdom.com, it became plainly evident that growth stocks were still very much on the minds of billionaire money managers.

  • Eisner Outflanked by Fanatics as $600 Million Payday Foiled by MLB Players

    It’s as if Mickey Mouse packed up and made camp over at Universal. Or maybe worse. Dealmaker Michael Eisner’s latest trophy project was dealt a huge blow when the MLB Players Association decided not to renew its deal with Topps and instead team with Fanatics to offer licensed trading cards starting in 2026. Baseball and […]

  • Mexican Peso Looks to Regain Its Crown as Carry Trade King

    (Bloomberg) -- Even as some emerging-market peers ramp up interest rates amid resurgent global inflation, Mexico is vying to regain its crown as the king of carry.While policy makers in Mexico have lagged behind their counterparts in Brazil, Russia and Turkey in raising borrowing costs, the peso remains attractive because of its stability, a major demand of any investor eking out small returns by borrowing in one currency and lending in another.One-month implied volatility on the peso fell to it

  • These 3 Dividend ETFs Are a Retiree's Best Friend

    Income-seeking investors don't have to mess with a bunch of individual stocks to build a diversified dividend portfolio. A couple of different funds could do the trick in a snap.

  • S&P 500 hasn’t fallen 5% from a peak in nearly 200 sessions—what that tells market historians

    Friday marks the 200th session that the S&P 500 index hasn't produced a drawdown of at least 5% from its recent peak, making the current stretch of equity levitation the longest since 2016, when the market went 404 sessions without falling by at least 5% peak to trough.

  • A ‘Flash Recession’ Might Be Looming. Here’s What That Means.

    Recently, data on economic growth have been missing estimates as the Delta variant of the virus that causes Covid-19 hampers global supply chains and demand. Bank of America strategists warned in a note published Friday morning that the near future is bleak for the economy, saying a flash recession could come this year. The bank flagged three reasons investors appear to be concerned about economic growth.

  • 1 Growth Stock Nobody's Talking About

    This under-the-radar payments company can bring experience, stability, and aggressive growth to your portfolio.

  • This record-breaking figure is now the average 401(k) balance

    If you want to see the benefits of saving early for your retirement and saving with regularity, look no further than the latest report from 401(k) giant Fidelity Investments. The average 401(k) account now has a record balance of $129,300, the company says. Fidelity calculates that even millennials who’ve held their 401(k)s for at least 15 years now have an average balance of just under $280,000.

  • Ark’s Cathie Wood says stock market ‘couldn’t be further away from a bubble.’ Here’s why.

    Star investor Cathie Wood, who runs a suite of popular ETFs in Ark Investment Management, says that there's no reason to fear that the market is becoming too bubblicious.

  • MLB, Players Ending Topps Card Deal for Fanatics Joint Venture

    Major League Baseball and the MLB Players Association are set to make a massive lineup change—ending an 70-year partnership with Topps to work with Fanatics on licensed trading cards starting in 2026. Topps has been producing baseball cards since 1951, and received an exclusive license from MLB in 2009. That agreement was later extended through […]

  • Why Jim Cramer Is Urging Investors Not To Sell Ford Stock

    Ford Motor Co (NYSE: F) has traded down to its lowest levels since May, but Jim Cramer urged investors not to sell Ford stock. As chip shortage issues continue to impact the automotive industry, Cramer said there are many things that are going well for Ford that investors should pay attention to. See Also: Ford Stock Breaks Critical Level "There are so many things that are going good at Ford including all new models and a decision to no longer lose money in a lot of different places," Cramer sai

  • Why I Am Never Selling Innovative Industrial Properties REIT

    Innovative Industrial Properties (NYSE: IIPR) is a unique real estate investment trust (REIT), as it's the first, and currently only, publicly traded REIT that specializes in the ownership, management, and leasing of real estate exclusively for the medical marijuana industry. The growth IIPR has achieved in such a short period of time is impressive by any standards. There are a number of contributing factors that set this REIT apart from the rest.

  • 2 Growth Stocks With 83% to 116% Upside, According to Wall Street

    Famed investor Benjamin Graham once made an interesting observation: "In the short term, the market is a voting machine; but in the long run, it is a weighing machine." Put another way, a stock's price on any given day is heavily influenced by its popularity, but the underlying fundamentals ultimately matter more over time.

  • 10 Best Stocks to Buy According to Warren Buffett

    In this article, we discuss the 10 best stocks to buy according to Warren Buffett. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Stocks to Buy According to Warren Buffett. Warren Buffett, the chief of Nebraska-based Berkshire Hathaway, is one of the most successful investors in […]

  • More Americans have $1 million saved for retirement than ever before

    Here’s some really good news: More Americans have a cool $1 million or more in their retirement accounts than ever before. The Boston-based investment giant says the number of 401(k) accounts with seven-figure balances swelled 84% in the 12 months ended June 30 to 412,000, while the number of seven-figure IRAs jumped more than 64% to 341,600.

  • ‘The Next Amazon’: 10 Undervalued Ecommerce Stocks with Huge Upside

    In this article, we discuss the 10 undervalued ecommerce stocks with huge upside. If you want to skip our detailed analysis of these stocks, go directly to ‘The Next Amazon’: 5 Undervalued Ecommerce Stocks with Huge Upside. The ecommerce business has become one of the main drivers of the world economy in recent years. According […]