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. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.
So should Genetic Signatures( ASX:GSS ) shareholders be worried about its cash burn? In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.
When Might Genetic Signatures Run Out Of Money?
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. In June 2025, Genetic Signatures had AU$31m in cash, and was debt-free. In the last year, its cash burn was AU$13m. That means it had a cash runway of about 2.4 years as of June 2025. Arguably, that's a prudent and sensible length of runway to have. You can see how its cash balance has changed over time in the image below.
Check out our latest analysis for Genetic Signatures
How Well Is Genetic Signatures Growing?
On balance, we think it's mildly positive that Genetic Signatures trimmed its cash burn by 12% over the last twelve months. And arguably the operating revenue growth of 63% was even more impressive. We think it is growing rather well, upon reflection. Clearly, however, the crucial factor is whether the company will grow its business going forward. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company .
How Easily Can Genetic Signatures Raise Cash?
While Genetic Signatures seems to be in a decent position, we reckon it is still worth thinking about how easily it could raise more cash, if that proved desirable. Companies can raise capital through either debt or equity. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).
Since it has a market capitalisation of AU$53m, Genetic Signatures' AU$13m in cash burn equates to about 25% of its 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.
Is Genetic Signatures' Cash Burn A Worry?
Even though its cash burn relative to its market cap makes us a little nervous, we are compelled to mention that we thought Genetic Signatures' revenue growth was relatively promising. While we're the kind of investors who are always a bit concerned about the risks involved with cash burning companies, the metrics we have discussed in this article leave us relatively comfortable about Genetic Signatures' situation. Separately, we looked at different risks affecting the company and spotted 3 warning signs for Genetic Signatures (of which 1 is concerning!) you should know about.
Of course Genetic Signatures may not be the best stock to buy. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership .
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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.
