Companies like LexaGene Holdings (CVE: LXG) can be classified as quite risky

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Even if a company loses money, shareholders can make money if they buy a good deal at the right price. Although Amazon.com has been making losses for many years after listing, if you had bought and held the stocks since 1999, you would have made a fortune. But while history praises these rare successes, those who fail are often forgotten; Who remembers Pets.com?

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "So, the natural question for LexaGene Holdings (CVE: LXG) Shareholders is whether they should be affected by its cash burn rate. In this report, we will look at the company's annual negative free cash flow and will hereinafter refer to it as “cash burn”. First, we will determine the cash runway by comparing the cash burn with the cash reserves. "Data-reactid =" 28 "> The natural question for LexaGene Holdings (CVE: LXG) is whether they should be affected by the cash burn rate. In this report, we will look at the company's annual negative free cash flow and will hereinafter refer to it as “cash burn”. First, we will determine the cash runway by comparing the cash burn with the cash reserves.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = " Check out our latest analysis for LexaGene Holdings "data-reactid =" 29 "> Check out our latest analysis for LexaGene Holdings

How long is the LexaGene Holdings cash runway?

You can calculate a company's cash runway by dividing the amount of cash by the rate at which it spends the cash. As of August 2019, LexaGene Holdings had cash of $ 430,000 and had no debt. It is important that the cash burn was $ 5.6 million in the past twelve months. So it seems to us that there has been a cash run of less than two months since August 2019. It is extremely surprising for us that the company has allowed the cash run to be so short! The picture below shows how cash on hand has changed in recent years.

TSXV: LXG Historical Debt, January 3, 2020

How does LexaGene Holdings' cash burn change over time?

<p class = "canvas-atom canvas-text MB (1.0em) MB (0) – SM MB (0.8em) – SM" type = "text" content = "Because LexaGene Holdings is not currently generating any revenue, we consider it as an early stage business. Although we can't look at sales to understand growth, we can look at how cash burn is changing to understand how spending has evolved over time in the past year at 8, 1%, suggesting that management is keeping an eye on the risk of cash depletion risks, admittedly, we are somewhat cautious towards LexaGene Holdings due to the lack of significant operating income from stocks This list of stocks whose analysts predict growth, "data-reactid =" 45 "> Since LexaGene Holdings is currently not earning revenue, we view it as an early stage business, so while we cannot look at sales to understand growth, we can see how cash burn works It changes to understand how spending evolves over time: the company's cash burn has decreased 8.1% over the past year, suggesting that management is at risk of exhaustion Liquidity reserves considered Due to the lack of significant operating income, LexaGene Holdings is somewhat cautious, which is why we generally prefer stocks from this list of stocks whose analysts forecast growth.

How difficult would it be for LexaGene Holdings to raise more money for growth?

Even if cash burn has been reduced recently, shareholders should still consider how easy it would be for LexaGene Holdings to raise more cash in the future. In general, a listed company can raise new cash by issuing shares or borrowing. In general, a company sells new shares to itself to raise cash and drive growth. We can compare a company's cash burn to its market cap to get a feel for how many new stocks a company would need to issue to fund its one-year business.

LexaGene Holdings has a market cap of $ 56 million and burned $ 5.6 million last year, or 10.0% of the company's market value. That's a small percentage, and we expect the company will be able to use a little watering down to raise more cash to finance growth or simply borrow some money.

How risky is LexaGene Holdings' liquidity situation?

<p class = "Canvas-Atom Canvas-Text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "In this analysis of the money burning by LexaGene Holdings we have We believe cash burn relative to market cap has been comforting while the cash runway is a little worrying, given all of the measures outlined in this report we think cash burn is fairly risky and if we hold stocks, we think Our data suggests that LexaGene Holdings insiders have traded the shares. You can find out whether they are buyers or sellers by clicking on this link, "data-reactid =" 50 "> In this analysis of LexaGene Holdings' cash burn, we believe that cash burn was comforting relative to market capitalization while the cash runway was a little worrying given all of the measures mentioned in this report We believe that burning cash is quite risky and if we held stocks we would be a hawk to watch for deterioration, especially our data shows that LexaGene Holdings insiders were trading the stocks and you can see if they are buyers or sellers by clicking this link.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Of course LexaGene Holdings may not be the best stock to buy, Maybe you want to see that free Collection of companies with high return on equity, or This list of stocks that insiders buy, "data-reactid =" 55 "> Of course LexaGene Holdings may not be the best stock to buy, Maybe you want to see that free Collection of companies with high return on equity or this list of stocks that insiders buy.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "If you discover an error that justifies a correction, please contact the editorial team at editorial-team@simplywallst.com, This article from Simply Wall St is general in nature. It is not a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Simply Wall St has no position in the stocks mentioned.

We strive to provide you with long-term, focused research analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Thank you for reading."data-reactid =" 56 ">If you discover an error that justifies a correction, please contact the editorial team at editorial-team@simplywallst.com. This article from Simply Wall St is general in nature. It is not a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Simply Wall St has no position in the stocks mentioned.

We strive to provide you with long-term, focused research analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Thank you for reading.