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.

So should SiTime (NASDAQ:SITM) shareholders 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'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

View our latest analysis for SiTime

How Long Is SiTime's 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 June 2024, SiTime had US$453m in cash, and was debt-free. Importantly, its cash burn was US$15m over the trailing twelve months. So it had a very long cash runway of many years from June 2024. Even though this is but one measure of the company's cash burn, the thought of such a long cash runway warms our bellies in a comforting way. Depicted below, you can see how its cash holdings have changed over time.

How Well Is SiTime Growing?

SiTime boosted investment sharply in the last year, with cash burn ramping by 96%. As if that's not bad enough, the operating revenue also dropped by 23%, making us very wary indeed. Considering both these metrics, we're a little concerned about how the company is developing. While the past is always worth studying, it is the future that matters most of all. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

Can SiTime Raise More Cash Easily?

SiTime seems to be in a fairly good position, in terms of cash burn, but we still think it's worthwhile considering how easily it could raise more money if it wanted to. Companies can raise capital through either debt or equity. 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.

SiTime's cash burn of US$15m is about 0.6% of its US$2.6b market capitalisation. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.