We can readily understand why investors are attracted to unprofitable companies. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

So should Richtech Robotics (NASDAQ:RR) shareholders be worried about its cash burn? For the purpose of this article, we’ll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). First, we’ll determine its cash runway by comparing its cash burn with its cash reserves.

Trump has pledged to “unleash” American oil and gas and these 15 US stocks have developments that are poised to benefit.

You can calculate a company’s cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. As at December 2024, Richtech Robotics had cash of US$36m and such minimal debt that we can ignore it for the purposes of this analysis. Looking at the last year, the company burnt through US$14m. Therefore, from December 2024 it had 2.6 years of cash runway. That’s decent, giving the company a couple years to develop its business. Depicted below, you can see how its cash holdings have changed over time.

Check out our latest analysis for Richtech Robotics

One thing for shareholders to keep front in mind is that Richtech Robotics increased its cash burn by 378% in the last twelve months. And that is all the more of a concern in light of the fact that operating revenue was actually down by 51% in the last year, as the company no doubt scrambles to change its fortunes. In light of the above-mentioned, we’re pretty wary of the trajectory the company seems to be on. Clearly, however, the crucial factor is whether the company will grow its business going forward. So you might want to take a peek at how much the company is expected to grow in the next few years.

Richtech Robotics seems to be in a fairly good position, in terms of cash burn, but we still think it’s worthwhile considering how easily it could raise more money if it wanted to. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund 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.