Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.
Given this risk, we thought we'd take a look at whether Graphite One (CVE:GPH) shareholders should 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.
When Might Graphite One Run Out Of Money?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. When Graphite One last reported its March 2026 balance sheet in May 2026, it had zero debt and cash worth US$29m. Looking at the last year, the company burnt through US$24m. That means it had a cash runway of around 15 months as of March 2026. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. The image below shows how its cash balance has been changing over the last few years.
View our latest analysis for Graphite One
How Is Graphite One's Cash Burn Changing Over Time?
Because Graphite One isn't currently generating revenue, we consider it an early-stage business. So while we can't look to sales to understand growth, we can look at how the cash burn is changing to understand how expenditure is trending over time. Even though it doesn't get us excited, the 22% reduction in cash burn year on year does suggest the company can continue operating for quite some time. Graphite One makes us a little nervous due to its lack of substantial operating revenue. So we'd generally prefer stocks from this list of stocks that have analysts forecasting growth.
Can Graphite One Raise More Cash Easily?
While Graphite One is showing a solid reduction in its cash burn, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. 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.
Since it has a market capitalisation of US$135m, Graphite One's US$24m in cash burn equates to about 17% of its market value. Given that situation, it's fair to say the company wouldn't have much trouble raising more cash for growth, but shareholders would be somewhat diluted.
Is Graphite One's Cash Burn A Worry?
The good news is that in our view Graphite One's cash burn situation gives shareholders real reason for optimism. One the one hand we have its solid cash burn relative to its market cap, while on the other it can also boast very strong cash burn reduction. We don't think its cash burn is particularly problematic, but after considering the range of factors in this article, we do think shareholders should be monitoring how it changes over time. Readers need to have a sound understanding of business risks before investing in a stock, and we've spotted 3 warning signs for Graphite One that potential shareholders should take into account before putting money into a stock.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies, and this list of stocks growth stocks (according to analyst forecasts)
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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.