We Think Janux Therapeutics (NASDAQ:JANX) Can Easily Afford To Drive Business Growth


We can readily understand why investors are attracted to unprofitable companies. 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. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

Given this risk, we thought we’d take a look at whether Janux Therapeutics (NASDAQ:JANX) 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). Let’s start with an examination of the business’ cash, relative to its cash burn.

See our latest analysis for Janux Therapeutics

How Long Is Janux Therapeutics’ 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 March 2022, Janux Therapeutics had cash of US$361m and no debt. Importantly, its cash burn was US$36m over the trailing twelve months. That means it had a cash runway of about 9.9 years as of March 2022. While this is only one measure of its cash burn situation, it certainly gives us the impression that holders have nothing to worry about. You can see how its cash balance has changed over time in the image below.

debt-equity-history-analysis
NasdaqGM:JANX Debt to Equity History June 5th 2022

How Easily Can Janux Therapeutics Raise Cash?

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 US$430m, Janux Therapeutics’ US$36m in cash burn equates to about 8.4% of its market value. That’s a low proportion, so we figure the company would be able to raise more cash to fund growth, with a little dilution, or even to simply borrow some money.

Is Janux Therapeutics’ Cash Burn A Worry?

Given it’s an early stage company, we don’t have a lot of data with which to judge Janux Therapeutics’ cash burn. Having said that, we can say that its cash runway was a real positive. Overall, we think its cash burn seems perfectly reasonable, and we are not concerned by it. Taking a deeper dive, we’ve spotted 4 warning signs for Janux Therapeutics you should be aware of, and 1 of them can’t be ignored.

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)

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.



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