Is Synertec (ASX:SOP) In A Good Position To Invest In Growth?

[Pelican Press 0]

This is the hidden content, please

• Sign In
• or
• Sign Up

Is Synertec (ASX:SOP) In A Good Position To Invest In Growth?

We can readily understand why investors are attracted to unprofitable companies. For example, although

This is the hidden content, please

• Sign In
• or
• Sign Up

.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. But the harsh reality is that very many loss making companies ***** through all their cash and go bankrupt.

Given this risk, we thought we’d take a look at whether Synertec (ASX:SOP) shareholders should be worried about its cash *****. For the purposes of this article, cash ***** 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 ***** with its cash reserves, to give us its ‘cash runway’.

This is the hidden content, please

• Sign In
• or
• Sign Up

Does Synertec Have A Long Cash Runway?

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 *****. In June 2024, Synertec had AU$6.4m in cash, and was debt-free. Looking at the last year, the company burnt through AU$10m. That means it had a cash runway of around 8 months as of June 2024. That’s quite a short cash runway, indicating the company must either reduce its annual cash ***** or replenish its cash. Depicted below, you can see how its cash holdings have changed over time.

This is the hidden content, please

• Sign In
• or
• Sign Up

debt-equity-history-analysis

How Well Is Synertec Growing?

Synertec actually ramped up its cash ***** by a whopping 84% in the last year, which shows it is boosting investment in the business. But the silver lining is that operating revenue increased by 28% in that time. In light of the data above, we’re fairly sanguine about the business growth trajectory. Of course, we’ve only taken a quick look at the stock’s growth metrics, here. You can take a look at how Synertec has developed its business over time by checking

This is the hidden content, please

• Sign In
• or
• Sign Up

.

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

Given the trajectory of Synertec’s cash *****, many investors will already be thinking about how it might 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 ***** 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 *****.

Synertec has a market capitalisation of AU$39m and burnt through AU$10m last year, which is 26% of the company’s market value. That’s not insignificant, and if the company had to sell enough shares to fund another year’s growth at the current share price, you’d likely witness fairly costly dilution.

Story continues

Is Synertec’s Cash ***** A Worry?

Even though its cash runway makes us a little nervous, we are compelled to mention that we thought Synertec’s revenue growth was relatively promising. Summing up, we think the Synertec’s cash ***** is a risk, based on the factors we mentioned in this article. On another note, we conducted an in-depth investigation of the company, and identified

This is the hidden content, please

• Sign In
• or
• Sign Up

(2 can’t be ignored!) that you should be aware of before investing here.

Of course Synertec may not be the best stock to buy. So you may wish to see this free

This is the hidden content, please

• Sign In
• or
• Sign Up

or

This is the hidden content, please

• Sign In
• or
• Sign Up

.

Have feedback on this article? Concerned about the content?

This is the hidden content, please

• Sign In
• or
• Sign Up

with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

This is the hidden content, please

• Sign In
• or
• Sign Up

#Synertec #ASXSOP #Good #Position #Invest #Growth

This is the hidden content, please

• Sign In
• or
• Sign Up

This is the hidden content, please

• Sign In
• or
• Sign Up