Here’s why we’re not too worried about Felix Group Holdings’ cash-consuming situation (ASX: FLX)


Even when a business loses money, it is possible for shareholders to make money if they buy a good business at the right price. For example, biotech and mineral exploration companies often lose money for years before they are successful with a new treatment or mineral discovery. But while history praises these rare successes, those that fail are often forgotten; who remembers

So should Felix Group Holdings (ASX: FLX) Are shareholders worried about its consumption of cash? For the purposes of this article, we’ll define cash consumption as the amount of cash the business spends each year to finance its growth (also known as negative free cash flow). First, we will determine its cash trail by comparing its cash consumption with its cash reserves.

Check out our latest analysis for Felix Group Holdings

Does Felix Group Holdings have a long cash trail?

You can calculate a company’s cash flow trail by dividing the amount of cash it has by the rate at which it spends that cash. As of June 2021, Felix Group Holdings had AU $ 8.9 million in cash and was debt free. In the past year, his cash consumption was AU $ 3.0 million. Therefore, as of June 2021, he had 3.0 years of cash flow. It’s decent, which gives the company a few years to develop its business. You can see how her cash balance has changed over time in the image below.

ASX: FLX History of debt to equity October 23, 2021

How is Felix Group Holdings growing?

Felix Group Holdings has managed to reduce its cash consumption by 60% over the past twelve months, which suggests it is on the right track. Unfortunately, however, operating revenues fell 2.5% over the same period. Overall, we would say the business is improving over time. In reality, this article does only a brief study of company growth data. You can see how Felix Group Holdings has grown its business over time by viewing this visualization of its revenue and profit history.

How easily can Felix Group Holdings raise funds?

We’re certainly impressed with the progress Felix Group Holdings has made over the past year, but it’s also worth considering how expensive it would be to raise more cash to fund faster growth. The issuance of new shares or indebtedness are the most common ways for a listed company to raise more money for its activity. Many companies end up issuing new shares to fund their future growth. By looking at one company’s cash consumption relative to its market capitalization, we get an idea of ​​how many shareholders would be diluted if the company needed to raise enough cash to cover another’s cash consumption. year.

As it has a market capitalization of A $ 35 million, Felix Group Holdings’ cash consumption of A $ 3.0 million is equivalent to approximately 8.6% of its market value. That’s a small proportion, so we think the company would be able to raise more cash to finance its growth, with a bit of dilution, or even just borrow money.

So, should we be concerned about the cash burn of Felix Group Holdings?

As you can probably see by now, we’re not too worried about Felix Group Holdings’ cash consumption. For example, we think his cash flow trail suggests the business is on the right track. Although the drop in income was not significant, the other factors mentioned in this article more than make up for the weakness of this measure. Looking at all of the metrics in this article, together, we’re not worried about its rate of cash consumption; the business appears to be well above its medium-term spending needs. On another note, Felix Group Holdings has 4 warning signs (and 1 which makes us a little uncomfortable) we think you should be aware of.

Sure, you might find a fantastic investment looking elsewhere. So take a look at this free list of companies that insiders buy, and this list of growth stocks (according to analysts’ forecasts)

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

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