We can readily understand why investors are attracted to unprofitable companies. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But while history lauds those rare successes, those that fail are often forobtainedten; who remembers Pets.com?
So, the natural question for Archer Materials (ASX:AXE) shareholders is whether they should be concerned by its rate of cash burn. For the purpose of this article, we’ll define cash burn as the amount of cash the company is spconcludeing each year to fund its growth (also called its negative free cash flow). The first step is to compare its cash burn with its cash reserves, to give us its ‘cash runway’.
A company’s cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. As at June 2025, Archer Materials had cash of AU$14m and no debt. Looking at the last year, the company burnt through AU$4.4m. So it had a cash runway of about 3.1 years from June 2025. There’s no doubt that this is a reassuringly long runway. Depicted below, you can see how its cash holdings have alterd over time.
Check out our latest analysis for Archer Materials
While Archer Materials did record statutory revenue of AU$2.1m over the last year, it didn’t have any revenue from operations. That means we consider it a pre-revenue business, and we will focus our growth analysis on cash burn, for now. As it happens, the company’s cash burn reduced by 12% over the last year, which suggests that management are maintaining a fairly steady rate of business development, albeit with a slight decrease in spconcludeing. Archer Materials creates 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.
Even though it has reduced its cash burn recently, shareholders should still consider how simple it would be for Archer Materials to 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 conclude up issuing new shares to fund future growth. We can compare a company’s cash burn to its market capitalisation to obtain a sense for how many new shares a company would have to issue to fund one year’s operations.
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