Adaptive Biotechnologies (NASDAQ: ADPT) is well positioned to deliver on its growth plans
Even when a business loses money, it is possible for shareholders to make money if they buy a good business at the right price. For example, biotech and mineral exploration companies often lose money for years before they are successful with a new treatment or mineral discovery. But the harsh reality is that many, many loss-making companies burn all their money and go bankrupt.
So should Adaptive biotechnologies (NASDAQ: ADPT) Are shareholders worried about its consumption of cash? For the purposes of this article, cash consumption is the annual rate at which an unprofitable business spends money to finance its growth; its negative free cash flow. The first step is to compare its cash consumption with its cash reserves, to give us its “cash flow track”.
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Do adaptive biotechnologies have a long cash flow track?
You can calculate a company’s cash flow trail by dividing the amount of cash it has by the rate at which it spends that cash. When Adaptive Biotechnologies last released its balance sheet in June 2021, it had no debt and cash worth $ 598 million. In the past year, its cash consumption amounted to US $ 234 million. Therefore, as of June 2021, he had 2.6 years of cash flow. It is undoubtedly a safe and reasonable length of track. It is important to note that if we extrapolate recent trends in cash consumption, the cash trail would be much longer. Pictured below, you can see how his cash holdings have changed over time.
To what extent are adaptive biotechnologies developing?
Adaptive Biotechnologies strongly stimulated investments over the last year, with an increase in cash consumption of 79%. On the positive side, at least operating revenue has increased by 45% over the same period, which gives hope. Overall, we would say the business is improving over time. Obviously, however, the crucial factor is whether the company will expand its business in the future. For this reason, it makes a lot of sense to take a look at our analyst forecast for the company.
Can Adaptive Biotechnology Easily Raise More Money?
There is no doubt that Adaptive Biotechnologies seems to be in a good enough position to manage its consumption of cash, but even if this is only hypothetical, it is still worth wondering how easily it could raise more money. to finance growth. Generally speaking, a listed company can raise new liquidity by issuing shares or going into debt. Usually, a company will sell new stocks on its own to raise funds and stimulate growth. By looking at one company’s cash consumption relative to its market capitalization, we get an idea of how many shareholders would be diluted if the company needed to raise enough cash to cover another’s cash consumption. year.
Adaptive Biotechnologies’ cash consumption of US $ 234 million represents approximately 4.6% of its market capitalization of US $ 5.1 billion. Given that this is a rather small percentage, it would probably be very easy for the company to finance the growth of another year by issuing new shares to investors, or even taking out a loan.
How risky is Adaptive Biotechnologies’ money-consuming situation?
As you can probably see by now, we’re not too worried about Adaptive Biotechnologies’ money consumption. In particular, we believe that the growth in its revenues is proof that the company has good control over its expenses. Although its growing consumption of cash has not been significant, the other factors mentioned in this article more than make up for the weakness of this measure. After taking into account the various measures mentioned in this report, we are quite comfortable with the way the company is spending its money, as it seems to be on track to meet its medium-term needs. In another register, Adaptive Biotechnologies has 3 warning signs (and 1 that can’t be ignored) we think you should be aware of.
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