Companies Like Radiopharm Theranostics (ASX:RAD) Could Be Quite Risky

Simply Wall St
·4 min read

Just because a business does not make any money, does not mean that the stock will go down. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. 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 Radiopharm Theranostics (ASX:RAD) shareholders should 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'. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

See our latest analysis for Radiopharm Theranostics

When Might Radiopharm Theranostics Run Out Of Money?

You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. As at June 2022, Radiopharm Theranostics had cash of AU$27m and no debt. In the last year, its cash burn was AU$38m. So it had a cash runway of approximately 8 months from June 2022. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. However, if we extrapolate the company's recent cash burn trend, then it would have a longer cash run way. You can see how its cash balance has changed over time in the image below.

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

How Is Radiopharm Theranostics' Cash Burn Changing Over Time?

Because Radiopharm Theranostics isn't currently generating revenue, we consider it an early-stage business. Nonetheless, we can still examine its cash burn trajectory as part of our assessment of its cash burn situation. Its cash burn positively exploded in the last year, up 48,323%. Given that sharp increase in spending, the company's cash runway will shrink rapidly as it depletes its cash reserves. Clearly, however, the crucial factor is whether the company will grow its business going forward. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

Can Radiopharm Theranostics Raise More Cash Easily?

Since its cash burn is moving in the wrong direction, Radiopharm Theranostics shareholders may wish to think 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.

Radiopharm Theranostics' cash burn of AU$38m is about 86% of its AU$44m market capitalisation. That suggests the company may have some funding difficulties, and we'd be very wary of the stock.

How Risky Is Radiopharm Theranostics' Cash Burn Situation?

As you can probably tell by now, we're rather concerned about Radiopharm Theranostics' cash burn. In particular, we think its cash burn relative to its market cap suggests it isn't in a good position to keep funding growth. And although we accept its cash runway wasn't as worrying as its cash burn relative to its market cap, it was still a real negative; as indeed were all the factors we considered in this article. Looking at the metrics in this article all together, we consider its cash burn situation to be rather dangerous, and likely to cost shareholders one way or the other. On another note, Radiopharm Theranostics has 7 warning signs (and 2 which shouldn't be ignored) 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.

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

  • Up next
  • Up next
  • Up next
  • Up next

Latest Stories

  • The stock market can rise another 13% this year even with a dwindling rate-cut outlook, Fundstrat's Tom Lee says

    The S&P 500 could end the year at 5,700 even if the outlook for Fed rate cuts doesn't brighten, Fundstrat's Tom Lee says.

  • Des Moines police identify woman allegedly killed by domestic partner

    Des Moines police identify woman allegedly killed by domestic partner

  • British actress Sophie Rundle expecting ‘baby number two’

    Rundle said she had forgotten who she had and had not told about the pregnancy.

  • Concerns about day care loom large in wake of YMCA closure announcement

    When YMCA officials announced on Tuesday that local operations will cease as of May 15, they made sure to mention that day care is one of the services they are hoping to keep alive. The Sault Ste. Marie YMCA offers 541 licensed day care spots across the city, with 140 of those spots being situated at the organization's recreation centre on 235 McNabb St. But now that this building is up for sale, Danica Boissoneau doesn't know what that means for her 18-month-old daughter, who just got enrolled

  • Lightning celebrate neurodiversity with new sensory room

    Lightning head coach Jon Cooper summed up why he loves it when the playoffs come around. "The emotional investment you get from the players, especially in that first round. What I consider the most exciting round in playoffs in any sport is that first round. It’s emotional chaos," he said after the regular season finale against Toronto. Sometimes that chaos can be a little overwhelming for fans who are sensitive to too much light and booming noise, which are common at every Lightning home game.

  • British BMX Olympians training in US for Paris Games

    Elite athletes from Great Britain's Olympic BMX team are in the U.S. for training ahead of the 2024 Paris Games. Jamie Bestwick's passion for BMX started when he was just 10 years old. Initially, it was a means of getting around his neighborhood, but he quickly realized the sport's potential. Now, decades later, with more than a dozen X-Tams gold medals to his name, he is coaching the British Olympic team. He brought his team to an action sports camp in Woodward, Pennsylvania, near State College.

  • St. Pete leaders launch new program to include residents in decision-making

    The City of St. Petersburg is trying to get residents more involved in decision-making. City leaders have one million dollars available for an Innovative Equity Project. The options to invest in for the Innovative Equity Project Initiative include: roof replacement, youth crime prevention, swim safety, volunteerism, and utility assistance.

  • Jasper and the rest of Canada had warmest winter on record

    If you thought that we just had a pretty mild winter, then you were right. This past winter was the warmest in Canada since record keeping began, said Alysa Pederson, meteorologist with Environment and Climate Change Canada. “We talk about climate change a lot, but a big part of this year and this winter, was [that] we were also in a very strong El Niño,” Pederson said. “That's what we would expect of El Niño. And then, of course, this year was a relatively strong one. We expected it to be warme

  • Strange celestial phenomenon: Atmosphere turns half white

    Residents of the Philippine island of Mindanao filmed a strange sight at the end of March. One half of the sky appeared white, the other blue. There was an optical phenomenon behind the two-tone appearance.

  • Jodie Foster was 'always interested' in life away from Hollywood stardom

    Jodie Foster admits she was "always interested" in having a normal life after finding fame as a child and going on to an Oscar-winning career as an adult.

  • Paris Hilton: 'Motherhood means more to me than fame and fortune ever could!'

    Paris Hilton had always dreamed of having a little girl called London as she admits that motherhood means more to her than fame and fortune ever could.

  • Louis Gossett Jr.'s cause of death revealed

    Louis Gossett Jr.'s official cause of death has been revealed just days after it had been announced that he had passed away at the age of 87.

  • Michael Douglas reveals what he and Catherine Zeta-Jones do on Fridays: 'She makes me look good!'

    Michael Douglas and Catherine Zeta-Jones spend their Friday nights dancing together although he finds it a bit "intimidating" because she is such an accomplished mover.

  • Olympic torch makes Acropolis overnight stop a week before handover to Paris organizers

    ATHENS, Greece (AP) — The flame that will burn at the Olympics is spending the night at the ancient Acropolis in Athens, a week before its handover to Paris 2024 organizers. During a lull in heavy rain late Friday, a torchbearer lit a cauldron in front of the 2,500-year-old Parthenon temple, on the citadel that dominates the Athens skyline and is Greece’s top tourist draw. The flame will stay there until Saturday morning, when the champagne-colored torch travels to Delphi, an important ancient G

  • Volunteer Fair to be held in Gananoque

    As a way to help connect a variety of community groups in the area, as well as to put the word out for the need for volunteerism, Gananoque Deputy Mayor Vicki Leakey has helped create another volunteer fair. This year’s Volunteer Fair will be held April 23 from 2 p.m. to 6 p.m. at the Gananoque Curling Club. “Many retirees as well as newcomers to our community have asked me about what groups are active in town,” said Leakey. “In my mind, it appears volunteering is mostly about socialization, par

  • Massachusetts transportation officials float idea of tolls at border

    The secretary of the Massachusetts Department of Transportation said a task force working to find more funding options is in its early stages, but it's looking into the idea of putting in tolls at the border.

  • Winning culture, new arena keys to player retention in Calgary, say Flames

    CALGARY — Winning more games and the construction of a new arena will convince more NHL players that Calgary is a desirable place to play, some Flames said as they headed for the exits Friday. Calgary finished 17 points out of the playoffs with a 38-39-5 record, and missed the post-season a second straight year. The Flames have won two playoff series in the last 20 years. A 2-6-1 start to 2023-24 combined with trades of big-name pending free agents unwilling to sign contract extensions impeded t

  • Jeremy Hunt weighing stamp duty cut before election – reports

    The Government is thought to be planning one more ‘fiscal event’ before the election.

  • Scottish Greens to hold vote on future of powersharing agreement at Holyrood

    The party will hold an extraordinary general meeting, after the Scottish Government ditched a climate change target.

  • UPDATE 1-Tenet Healthcare, union coalition reach tentative deal

    A union coalition for Tenet Healthcare's workers reached a tentative labor deal with the hospital system that included across-the-board raises of 14% over three years for full and part-time workers, the union said on Friday. Labor unions across the United States have grown bolder in their demands in the last two years, pressing for higher wages and better benefits to combat a loss of spending power caused by inflation and the healthcare sector has emerged at the forefront of that trend. This is the second major agreement in the healthcare sector after Kaiser Permanente's healthcare workers in November voted to ratify a new contract with the hospital chain.