We are not worried about Monte Rosa Therapeutics’ silver consumption (NASDAQ: GLUE)
Even when a business loses money, it is possible for shareholders to make money if they buy a good business at the right price. For example, although the software as a service company Salesforce.com lost money for years as it increased its recurring revenue, if you had owned stocks since 2005, you would have done very well. Still, only an idiot would ignore the risk that a loss-making company burns its cash too quickly.
In view of this risk, we thought to examine whether Therapeutic of Monte Rosa (NASDAQ: GLUE) shareholders should be concerned about its consumption of cash. For the purposes of this article, we’ll define cash consumption as the amount of cash the business spends each year to finance its growth (also known as negative free cash flow). Let’s start with a review of the company’s cash flow, relative to its cash consumption.
Check out our latest review for Monte Rosa Therapeutics
Does Monte Rosa Therapeutics have a long cash flow trail?
A company’s cash flow trail is calculated by dividing its cash reserve by its cash consumption. As of June 2021, Monte Rosa Therapeutics had US $ 357 million in cash and was debt free. Importantly, his cash consumption was US $ 50 million in the past twelve months. This means that it had a cash flow track of approximately 7.2 years as of June 2021. Even though this is only a measure of the company’s cash consumption, the idea of ââa This long cash trail warms our stomachs in a heartwarming way. Pictured below, you can see how his cash holdings have changed over time.
How does Monte Rosa Therapeutics’ silver consumption change over time?
Since Monte Rosa Therapeutics does not currently generate any revenue, we consider it to be a start-up company. Nonetheless, we can still examine its cash consumption trajectory as part of our assessment of its cash consumption situation. It turns out that the company’s cash consumption has decreased by 15% over the past year, which suggests that management is maintaining a fairly stable pace of business development, but with a slight decrease in expenses. If the past is always worth studying, it is the future that matters most. You might want to take a look at how the business is expected to grow over the next few years.
Would it be difficult for Monte Rosa Therapeutics to raise more money for growth?
While Monte Rosa Therapeutics shows a sharp reduction in its consumption of cash, it’s still worth considering how easily it could raise more cash, even just to fuel faster growth. The issuance of new shares or indebtedness are the most common ways for a listed company to raise more money for its activity. One of the main advantages held by publicly traded companies is that they can sell stocks to investors to raise funds and finance growth. We can compare a company’s cash consumption to its market capitalization to get an idea of ââhow many new shares a company would need to issue to fund its one-year operations.
Since it has a market capitalization of US $ 1.1 billion, Monte Rosa Therapeutics’ US $ 50 million in cash consumption is equivalent to approximately 4.5% of its market value. Given that this is a rather small percentage, it would probably be very easy for the company to finance the growth of another year by issuing new shares to investors, or even taking out a loan.
So, should we be worried about Monte Rosa Therapeutics’ money consumption?
As you can probably see by now, we’re not too worried about Monte Rosa Therapeutics’ money consumption. In particular, we believe that its cash flow track is proof that the company has good control over its spending. Its weak point is its reduction in money consumption, but even that was not so bad! Looking at all of the metrics in this article, together, we’re not worried about its rate of cash consumption; the business appears to be well above its medium-term spending needs. Separately, we examined different risks affecting the business and identified 4 warning signs for Monte Rosa Therapeutics (2 of which are a bit disturbing!) that you should know about.
If you prefer to consult another company with better fundamentals, don’t miss this free list of interesting companies that have HIGH return on equity and low leverage or this list of stocks that are all expected to grow.
When trading Monte Rosa Therapeutics or any other investment, use the platform considered by many to be the gateway for professionals to the global market, Interactive Brokers. You get the cheapest * transactions in stocks, options, futures, forex, bonds and funds from around the world from one integrated account. Promoted
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
*Interactive Brokers Ranked Least Expensive Broker By StockBrokers.com Online Annual Review 2020
Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.