森蒂生物科學公司(納斯達克股票代碼：SNTI)是否處於實現增長計劃的有利地位？

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. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

So should Senti Biosciences (NASDAQ:SNTI) shareholders be worried about its cash burn? 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. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

View our latest analysis for Senti Biosciences

When Might Senti Biosciences 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. In December 2021, Senti Biosciences had US$57m in cash, and was debt-free. Importantly, its cash burn was US$40m over the trailing twelve months. That means it had a cash runway of around 17 months as of December 2021. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. You can see how its cash balance has changed over time in the image below.

How Is Senti Biosciences' Cash Burn Changing Over Time?

In our view, Senti Biosciences doesn't yet produce significant amounts of operating revenue, since it reported just US$2.8m in the last twelve months. Therefore, for the purposes of this analysis we'll focus on how the cash burn is tracking. During the last twelve months, its cash burn actually ramped up 59%. While this spending increase is no doubt intended to drive growth, if the trend continues the company's cash runway will shrink very quickly. In reality, this article only makes a short study of the company's growth data. This graph of historic revenue growth shows how Senti Biosciences is building its business over time.

How Hard Would It Be For Senti Biosciences To Raise More Cash For Growth?

Given its cash burn trajectory, Senti Biosciences shareholders may wish to consider how easily it could raise more cash, despite its solid cash runway. Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.

Senti Biosciences' cash burn of US$40m is about 55% of its US$73m market capitalisation. 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 Senti Biosciences' Cash Burn A Worry?

On this analysis of Senti Biosciences' cash burn, we think its cash runway was reassuring, while its cash burn relative to its market cap has us a bit worried. Looking at the factors mentioned in this short report, we do think that its cash burn is a bit risky, and it does make us slightly nervous about the stock. Its important for readers to be cognizant of the risks that can affect the company's operations, and we've picked out 3 warning signs for Senti Biosciences that investors should know when investing in the stock.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies, 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.