It’s easy to understand why investors are drawn to unprofitable companies. For example, Amazon.com lost money for years after going public, but would have made a lot of money if it had bought and held stock since 1999. But while success stories are well-known, investors shouldn’t ignore the sheer number of unprofitable companies that simply run out of all their cash and go bankrupt.
So the natural question is 17 Education and Technology Group (NASDAQ:YQ) stockholders are weighing whether they should care about cash burn percentages. For the purposes of this article, cash burn is defined as annual (negative) free cash flow. This is the amount a company spends each year on growth. To calculate your cash runway, start by comparing your cash burn and cash reserves.
See the latest analysis from 17 Education & Technology Group.
17 How long is the Education & Technology Group cash runway?
A company’s cash runway is calculated by dividing cash hold by cash burn. As of June 2022, 17 Education & Technology Group has cash of RMB 894 million and no debt. Looking at last year, the company used up his CN¥1.6 billion. So it had about seven months of cash runway starting in June 2022. This is a very short cash runway and indicates the company needs to reduce its annual cash burn or replenish its cash. The image below shows how cash balances have changed over the past few years.
17 How fast is the Education & Technology Group growing?
Some investors believe 17 Education & Technology Group actually It has increased Last year it increased by 46%. Also, I have to say that operating revenue was down 27% for him in the same period, which is cause for concern. Taken together, I think these growth metrics are a little worrying. Of course, we’ve only briefly looked at stock growth indicators here. This historical earnings vs revenue chart shows how 17 Education & Technology Group has built its business over time.
17 How easy is Education & Technology Group to raise cash?
17 Education & Technology Group’s revenues are declining and its cash burn is increasing, so many may think they need to raise more cash in the future. Generally speaking, publicly traded companies can raise new cash by issuing shares or borrowing money. Many companies will issue new shares to fund future growth. By comparing a company’s annual cash burn with its market capitalization, we can approximate the number of shares that would need to be issued to keep the company running for another year (at the same burn rate).
17 Education & Technology Group has a market capitalization of CN 636 million and used up CN 1.6 billion last year. This represents 257% of the company’s market value. Considering how high that expenditure is compared to the company’s market value, we believe there is a high risk of funding difficulties and would be very nervous about holding the stock.
17 How dangerous is the Education & Technology Group cash burn situation?
As you can see, we are concerned about 17 Education & Technology Group’s cash burn. For example, consider cash burn compared to market capitalization. This suggests that the company may struggle to raise funding in the future. We admit that the increase in cash burn wasn’t as worrisome as the cash burn relative to market capitalization, but it was still really negative. In fact, all the factors considered in this article did. Based on the measures discussed in this article, it seems likely that the company’s cash burn is indeed very concerning and that its weak cash position will harm its shareholders in some way.Diving deeper, we found 17 Education & Technology Group 3 Warning Signs You should know, and one of them makes us a little uncomfortable.
of course, You can find great investments by looking elsewhere. Let’s take a look at this freedom List of companies that insiders are buying, and this list of stock growth stocks (according to analyst predictions)
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This article by Simply Wall St is general in nature. We provide comments based on historical data and analyst projections using only unbiased methodologies and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. We aim to deliver long-term focused analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Is not …
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