CRDL - Strong Cash Position Thought I'd share the attached.
CRDL is in a very strong cash position to fund all their trials, they are expected to be at break even or profitable in 2022.
Looking forward to the NASDAQ listing next month, that should take the SP to $8-10!
When the FDA approvals come in, this stock will soar as the number of shares outstanding is very limited compared to other biotech companies. In Q3 we should see CRDL move into the 'Billion Dollar' category meaning a SP over $30.
From Simply Wall Street earlier today....
Just because a business does not make any money, does not mean that the stock will go down. By way of example, Cardiol Therapeutics (TSE:CRDL) has seen its share price rise 121% over the last year, delighting many shareholders. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.
In light of its strong share price run, we think now is a good time to investigate how risky Cardiol Therapeutics' cash burn is. In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. Let's start with an examination of the business' cash, relative to its cash burn.
See our latest analysis for Cardiol Therapeutics
How Long Is Cardiol Therapeutics' Cash Runway?
You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. As at September 2020, Cardiol Therapeutics had cash of CA$17m and no debt. Importantly, its cash burn was CA$9.8m over the trailing twelve months. Therefore, from September 2020 it had roughly 20 months of cash runway. Importantly, analysts think that Cardiol Therapeutics will reach cashflow breakeven in 3 years. That means unless the company reduces its cash burn quickly, it may well look to raise more cash. Depicted below, you can see how its cash holdings have changed over time.
Cardiol Therapeutics didn't record any revenue over the last year, indicating that it's an early stage company still developing its business. Nonetheless, we can still examine its cash burn trajectory as part of our assessment of its cash burn situation. While it hardly paints a picture of imminent growth, the fact that it has reduced its cash burn by 43% over the last year suggests some degree of prudence. 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 Cardiol Therapeutics To Raise More Cash For Growth?
Even though it has reduced its cash burn recently, shareholders should still consider how easy it would be for Cardiol Therapeutics to raise more cash in the future. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. 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.
Cardiol Therapeutics has a market capitalisation of CA$164m and burnt through CA$9.8m last year, which is 6.0% of the company's market value. Given that is a rather small percentage, it would probably be really easy for the company to fund another year's growth by issuing some new shares to investors, or even by taking out a loan.
So, Should We Worry About Cardiol Therapeutics' Cash Burn?
Cardiol Therapeutics appears to be in pretty good health when it comes to its cash burn situation. Not only was its cash burn reduction quite good, but its cash burn relative to its market cap was a real positive. One real positive is that analysts are forecasting that the company will reach breakeven. Based on the factors mentioned in this article, we think its cash burn situation warrants some attention from shareholders, but we don't think they should be worried. An in-depth examination of risks revealed 3 warning signs for Cardiol Therapeuticsthat readers should think about before committing capital to this stock.