我们希望MoSys（NASDAQ：MOSY）能够明智地使用现金

Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. By way of example,MoSys(NASDAQ:MOSY) has seen its share price rise 320% 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.

So notwithstanding the buoyant share price, we think it's well worth asking whether MoSys' cash burn is too risky. For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

View our latest analysis for MoSysWhen Might MoSys Run Out Of Money?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When MoSys last reported its balance sheet in June 2021, it had zero debt and cash worth US$20m. Importantly, its cash burn was US$4.3m over the trailing twelve months. So it had a cash runway of about 4.6 years from June 2021. There's no doubt that this is a reassuringly long runway. The image below shows how its cash balance has been changing over the last few years.NasdaqCM:MOSY Debt to Equity History September 6th 2021How Well Is MoSys Growing?

MoSys boosted investment sharply in the last year, with cash burn ramping by 87%. As if that's not bad enough, the operating revenue also dropped by 9.7%, making us very wary indeed. Considering both these metrics, we're a little concerned about how the company is developing. In reality, this article only makes a short study of the company's growth data. You can take a look at how MoSys has developed its business over time by checking this visualization of its revenue and earnings history.How Hard Would It Be For MoSys To Raise More Cash For Growth?

While MoSys seems to be in a fairly good position, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund 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.

MoSys' cash burn of US$4.3m is about 8.2% of its US$52m market capitalisation. 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.How Risky Is MoSys' Cash Burn Situation?

Even though its increasing cash burn makes us a little nervous, we are compelled to mention that we thought MoSys' cash runway was relatively promising. Considering all the factors discussed in this article, we're not overly concerned about the company's cash burn, although we do think shareholders should keep an eye on how it develops. On another note, MoSys has3 warning signs(and 1 which is a bit concerning) we think you should know about.

Of course,you might find a fantastic investment by looking elsewhere.So take a peek at thisfreelist of companies insiders are buying, and this list of stocks growth stocks (according to analyst forecasts)

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.

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