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. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.

Given this risk, we thought we'd take a look at whether Lightbridge (NASDAQ:LTBR) 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 Lightbridge

Does Lightbridge Have A Long Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. As at March 2024, Lightbridge had cash of US$28m and no debt. Importantly, its cash burn was US$6.8m over the trailing twelve months. That means it had a cash runway of about 4.1 years as of March 2024. There's no doubt that this is a reassuringly long runway. The image below shows how its cash balance has been changing over the last few years.

How Is Lightbridge's Cash Burn Changing Over Time?

Lightbridge didn't record any revenue over the last year, indicating that it's an early stage company still developing its business. Nonetheless, we can still examine its cash burn trajectory as part of our assessment of its cash burn situation. Over the last year its cash burn actually increased by 5.7%, which suggests that management are increasing investment in future growth, but not too quickly. However, the company's true cash runway will therefore be shorter than suggested above, if spending continues to increase. Admittedly, we're a bit cautious of Lightbridge due to its lack of significant operating revenues. So we'd generally prefer stocks from this list of stocks that have analysts forecasting growth.

How Easily Can Lightbridge Raise Cash?

While its cash burn is only increasing slightly, Lightbridge shareholders should still consider the potential need for further cash, down the track. Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive 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.