Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. 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. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

Given this risk, we thought we'd take a look at whether LiveWire Group (NYSE:LVWR) 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). The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

Does LiveWire Group 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. As at September 2024, LiveWire Group had cash of US$88m and no debt. Importantly, its cash burn was US$109m over the trailing twelve months. Therefore, from September 2024 it had roughly 10 months of cash runway. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. The image below shows how its cash balance has been changing over the last few years.

How Well Is LiveWire Group Growing?

Some investors might find it troubling that LiveWire Group is actually increasing its cash burn, which is up 12% in the last year. And we must say we find it concerning that operating revenue dropped 3.7% over the same period. In light of the data above, we're fairly sanguine about the business growth trajectory. Of course, we've only taken a quick look at the stock's growth metrics, here. You can take a look at how LiveWire Group has developed its business over time by checking this visualization of its revenue and earnings history.

Can LiveWire Group Raise More Cash Easily?

LiveWire Group revenue is declining and its cash burn is increasing, so many may be considering its need to raise more cash in the future. 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 looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.

LiveWire Group has a market capitalisation of US$1.2b and burnt through US$109m last year, which is 9.3% of the company's 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 LiveWire Group's Cash Burn A Worry?

Even though its cash runway makes us a little nervous, we are compelled to mention that we thought LiveWire Group's cash burn relative to its market cap was relatively promising. We don't think its cash burn is particularly problematic, but after considering the range of factors in this article, we do think shareholders should be monitoring how it changes over time. An in-depth examination of risks revealed 2 warning signs for LiveWire Group that readers should think about before committing capital to this stock.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies with significant insider holdings, and this list of stocks growth stocks (according to analyst forecasts)

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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.