Is ReWalk Robotics (NASDAQ:LFWD) In A Good Position To Deliver On Growth Plans?

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. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

Given this risk, we thought we’d take a look at whether ReWalk Robotics (NASDAQ:LFWD) 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’. The first step is to compare its cash burn with its cash reserves, to give us its ‘cash runway’.

View our latest analysis for ReWalk Robotics

When Might ReWalk Robotics Run Out Of Money?

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. When ReWalk Robotics last reported its March 2024 balance sheet in May 2024, it had zero debt and cash worth US$21m. Importantly, its cash burn was US$23m over the trailing twelve months. That means it had a cash runway of around 11 months as of March 2024. That’s quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. You can see how its cash balance has changed over time in the image below.

How Well Is ReWalk Robotics Growing?

Some investors might find it troubling that ReWalk Robotics is actually increasing its cash burn, which is up 33% in the last year. Given that its operating revenue increased 205% in that time, it seems the company has reason to think its expenditure is working well to drive growth. If revenue is maintained once spending on growth decreases, that could well pay off! It seems to be growing nicely. While the past is always worth studying, it is the future that matters most of all. So you might want to take a peek at how much the company is expected to grow in the next few years.

How Hard Would It Be For ReWalk Robotics To Raise More Cash For Growth?

ReWalk Robotics 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. 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.

ReWalk Robotics has a market capitalisation of US$39m and burnt through US$23m last year, which is 59% of the company’s market value. From this perspective, it seems that the company spent a huge amount relative to its market value, and we’d be very wary of a painful capital raising.

Is ReWalk Robotics’ Cash Burn A Worry?

Even though its cash burn relative to its market cap makes us a little nervous, we are compelled to mention that we thought ReWalk Robotics’ revenue growth was relatively promising. Summing up, we think the ReWalk Robotics’ cash burn is a risk, based on the factors we mentioned in this article. Separately, we looked at different risks affecting the company and spotted 3 warning signs for ReWalk Robotics (of which 1 is a bit concerning!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies with significant insider holdings, and this list of stocks growth stocks (according to analyst forecasts)

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.