ASX:GTR Income Statement Oct 6th 17
When will GTR need to raise more cash?
Over the last twelve months, opex (excluding one-offs) increased by 1.13%, which is relatively appropriate for a small-cap company. However, if GTR continues to grow its opex at this rate, given how much money it currently has in the bank, it will actually need to raise capital again within the next couple of months! This is also the case if GTR maintains its opex level of $1.3M, without growth, going forward. Although this is a relatively simplistic calculation, and GTR may reduce its costs or open a new line of credit instead of issuing new equity shares, the analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.
What this means for you:
Are you a shareholder? You now have a better understanding of the risks you may face holding onto the stock, since we know the company could potentially run into some issues in the next couple of months. Keep in mind that opex is only one side of the coin. I recommend also looking at GTR’s revenues in order to forecast when the company will become breakeven and start producing profits for shareholders.
Are you a potential investor? Loss-making companies are a risky play, especially those that are still ramping up its opex. Though, this shouldn’t discourage you from considering entering the stock in the future. Now you know that if GTR were to continue to grow its opex at this rate, it will not be able to sustain its operations given the current level of cash reserves. The potential equity raising resulting from this means you could potentially get a better deal on the share price when the company raises capital next.
An experienced management team on the helm increases our confidence in the business – take a look at who sits on GTR’s board and the CEO’s back ground and experience here. If you believe you should cushion your portfolio with something less risky, scroll through my list of highly profitable companies to add to your portfolio..
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.