ASX:CHZ Income Statement Oct 5th 17
When will CHZ need to raise more cash?
In CHZ’s case, its opex fell by 40.97% last year, which may signal the company moving towards a more sustainable level of expenses. If the company does not increase its opex next year and remains at the current level of $0.5M, then it should not need to raise further capital for the next few years. Although this is a relatively simplistic calculation, and CHZ may continue to reduce its costs further or raise debt capital instead of coming to equity markets, 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. In addition to this analysis, I suggest you take a look at their expected revenue growth to determine the timing of future profitability as well.
Are you a potential investor? Loss-making companies are a risky play, even those that are reducing their opex over time. Though, this shouldn’t discourage you from considering entering the stock in the future. The cash burn analysis result indicates a cash constraint for CHZ, due to its current level of cash reserves. An opportunity may exist for you to enter into the stock at an attractive price, should CHZ come to market to fund its operations.
An experienced management team on the helm increases our confidence in the business – take a look at who sits on CHZ’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.