Analyzing Amaero International’s Cash Burn and Potential for Growth

Are you looking to invest in a company that is showing strong gains for shareholders, even in the face of financial losses? Amaero International (ASX:3DA) may be worth considering. Despite losing money, the stock is up 109% in the last year, providing significant returns for investors.

However, it’s essential to consider the company’s cash burn when evaluating its potential as an investment. Cash burn refers to the amount of money a company spends each year to fund its growth. By comparing its cash burn with its cash reserves, we can determine its ‘cash runway’, or how long the company can sustain its operations with its current cash reserves.

As of December 2023, Amaero International had zero debt and AU$12m in cash reserves. The company burned through AU$11m in the last year, giving it a cash runway of approximately 13 months. While this may seem concerning, the one analyst covering the stock predicts that Amaero International will reach cashflow breakeven in 3 years.

It’s also important to monitor how a company’s cash burn is changing over time. Amaero International’s cash burn decreased by 10% last year, indicating that management believes the company is spending enough to advance its business plans at an appropriate pace. While revenue generation is still minimal at this point, reducing cash burn is a positive step towards profitability.

In terms of raising more cash, Amaero International appears to be in a good position. Its cash burn represents only 6.3% of its market capitalization, suggesting that the company could easily raise more funds through equity issuance or debt.

Overall, Amaero International’s cash burn situation seems relatively stable. While investing in cash-burning companies can be risky, the company’s progress in reducing cash burn and its ability to raise additional funds are positive indicators. It’s important to consider all factors before making an investment decision, but Amaero International’s strong share price performance and potential for future growth make it an intriguing prospect for investors.

If you’re interested in learning more about Amaero International or other high-return investment opportunities, consider seeking advice from a financial advisor. Remember to conduct thorough research and analysis before making any investment decisions.