Just because a business does not make any money, does not mean that the stock will go down. For example, Janux Therapeutics (NASDAQ:JANX) shareholders have done very well over the last year, with the share price soaring by 474%. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

In light of its strong share price run, we think now is a good time to investigate how risky Janux Therapeutics' cash burn is. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

Does Janux Therapeutics Have A Long 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. When Janux Therapeutics last reported its June 2024 balance sheet in August 2024, it had zero debt and cash worth US$646m. Importantly, its cash burn was US$48m over the trailing twelve months. That means it had a cash runway of very many years as of June 2024. While this is only one measure of its cash burn situation, it certainly gives us the impression that holders have nothing to worry about. Depicted below, you can see how its cash holdings have changed over time.

How Well Is Janux Therapeutics Growing?

We reckon the fact that Janux Therapeutics managed to shrink its cash burn by 20% over the last year is rather encouraging. And arguably the operating revenue growth of 95% was even more impressive. We think it is growing rather well, upon reflection. While the past is always worth studying, it is the future that matters most of all. So you might want to take a peek at how much the company is expected to grow in the next few years.

Can Janux Therapeutics Raise More Cash Easily?

We are certainly impressed with the progress Janux Therapeutics has made over the last year, but it is also worth considering how costly it would be if it wanted to raise more cash to fund faster growth. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. Many companies end up issuing new shares to fund future 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$2.6b, Janux Therapeutics' US$48m in cash burn equates to about 1.8% of its market value. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.

How Risky Is Janux Therapeutics' Cash Burn Situation?

As you can probably tell by now, we're not too worried about Janux Therapeutics' cash burn. For example, we think its revenue growth suggests that the company is on a good path. On this analysis its cash burn reduction was its weakest feature, but we are not concerned about it. After considering a range of factors in this article, we're pretty relaxed about its cash burn, since the company seems to be in a good position to continue to fund its growth. Separately, we looked at different risks affecting the company and spotted 3 warning signs for Janux Therapeutics (of which 1 shouldn't be ignored!) you should know about.

If you would prefer to check out another company with better fundamentals, then do not miss this free list of interesting companies, that have HIGH return on equity and low debt or this list of stocks which are all forecast to grow.

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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.