Beam Global (NASDAQ:BEEM) is well positioned to realize its growth plans


Even when a company loses money, it is possible for shareholders to make money if they buy a good company at the right price. For example, although software-as-a-service company lost money for years as it grew recurring revenue, if you had held stock since 2005, you would have done very well. But while the success stories are well known, investors shouldn’t ignore the many, many unprofitable companies that simply burn all their money and crash.

Given this risk, we thought we would examine whether Overall beam (NASDAQ:BEEM) shareholders should worry about its cash burn. For the purposes of this article, we will define cash burn as the amount of money the business spends each year to fund its growth (also known as negative free cash flow). We will start by comparing its cash consumption with its cash reserves in order to calculate its cash trail.

Does Beam Global have a long cash trail?

You can calculate a company’s cash trail by dividing the amount of cash it has on hand by the rate at which it spends that money. Beam Global has such low debt that we are going to set it aside and focus on the US$23 million of cash it held in September 2021. Importantly, its cash burn was $6.7 million. US dollars over the last twelve months. It therefore had a cash trail of around 3.4 years as of September 2021. There is no doubt that this is a reassuringly long trail. You can see how his cash balance has changed over time in the image below.

NasdaqCM: BEEM Debt to Equity History February 9, 2022

How is Beam Global growing?

On the face of it, it’s a bit worrying that Beam Global actually increased its cash burn by 38%, year-over-year. But looking on the bright side, its revenue grew 71%, lending some credence to the growth story. The company must maintain this growth if it really wants to please shareholders. We think he’s developing quite well, on second thought. While the past is always worth studying, it is the future that matters most. For this reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

How easily can Beam Global raise funds?

There’s no doubt that Beam Global seems to be in a pretty good position to manage its cash burn, but even if it’s only hypothetical, it’s still worth asking how easily it could raise more cash. to finance growth. Issuing new shares or going into debt are the most common ways for a listed company to raise more funds for its business. Typically, a company will sell new stock on its own to raise cash and drive growth. By looking at a company’s cash burn relative to its market capitalization, we gain insight into how much of a shareholder base would be diluted if the company needed to raise enough cash to cover a company’s cash burn. another year.

With a market capitalization of $115 million, Beam Global’s cash burn of $6.7 million equates to approximately 5.9% of its market value. Since this is a rather small percentage, it would probably be very easy for the company to finance another year’s growth by issuing new shares to investors, or even taking out a loan.

Is Beam Global’s cash burn a concern?

As you can probably tell by now, we’re not too worried about Beam Global’s cash burn. For example, we think its revenue growth suggests the company is on the right track. While its growing cash burn was not significant, the other factors mentioned in this article more than offset the weakness in this metric. After considering the various metrics mentioned in this report, we are quite comfortable with how the company is spending its money, as it appears to be on track to meet its medium-term needs. A thorough examination of the risks revealed 2 warning signs for Beam Global readers should consider before committing capital to this title.

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

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