We can readily understand why investors are attracted to unprofitable companies. Indeed, RAS Technology Holdings (ASX:RTH) stock is up 198% in the last year, providing strong gains for shareholders. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

Given its strong share price performance, we think it's worthwhile for RAS Technology Holdings shareholders to consider whether its cash burn is concerning. For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). Let's start with an examination of the business' cash, relative to its cash burn.

Check out our latest analysis for RAS Technology Holdings

Does RAS Technology Holdings Have A Long Cash Runway?

A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. In December 2023, RAS Technology Holdings had AU$8.5m in cash, and was debt-free. Importantly, its cash burn was AU$173k over the trailing twelve months. So it had a very long cash runway of many years from December 2023. While this is only one measure of its cash burn situation, it certainly gives us the impression that holders have nothing to worry about. The image below shows how its cash balance has been changing over the last few years.

How Well Is RAS Technology Holdings Growing?

Given our focus on RAS Technology Holdings' cash burn, we're delighted to see that it reduced its cash burn by a nifty 94%. And revenue is up 35% in that same period; also a good sign. Overall, we'd say its growth is rather impressive. In reality, this article only makes a short study of the company's growth data. You can take a look at how RAS Technology Holdings is growing revenue over time by checking this visualization of past revenue growth.

How Easily Can RAS Technology Holdings Raise Cash?

There's no doubt RAS Technology Holdings seems to be in a fairly good position, when it comes to managing its cash burn, but even if it's only hypothetical, it's always worth asking how easily it could raise more money to fund growth. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).