We Think Arizona Sonoran Copper (TSE:ASCU) Needs To Drive Business Growth Carefully
There's no doubt that money can be made by owning shares of unprofitable businesses. 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. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?
So should Arizona Sonoran Copper (TSE:ASCU) shareholders be worried about its cash burn? In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.
Our free stock report includes 5 warning signs investors should be aware of before investing in Arizona Sonoran Copper. Read for free now.
You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. In March 2025, Arizona Sonoran Copper had US$31m in cash, and was debt-free. Looking at the last year, the company burnt through US$36m. That means it had a cash runway of around 10 months as of March 2025. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. Depicted below, you can see how its cash holdings have changed over time.
See our latest analysis for Arizona Sonoran Copper
Arizona Sonoran Copper didn't record any revenue over the last year, indicating that it's an early stage company still developing its business. Nonetheless, we can still examine its cash burn trajectory as part of our assessment of its cash burn situation. It seems likely that the business is content with its current spending, as the cash burn rate stayed steady over the last twelve months. 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.
While its cash burn is only increasing slightly, Arizona Sonoran Copper shareholders should still consider the potential need for further cash, down the track. 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 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.
Arizona Sonoran Copper's cash burn of US$36m is about 16% of its US$220m market capitalisation. As a result, we'd venture that the company could raise more cash for growth without much trouble, albeit at the cost of some dilution.
Even though its cash runway makes us a little nervous, we are compelled to mention that we thought Arizona Sonoran Copper's cash burn relative to its market cap was relatively promising. Summing up, we think the Arizona Sonoran Copper's cash burn is a risk, based on the factors we mentioned in this article. Separately, we looked at different risks affecting the company and spotted 5 warning signs for Arizona Sonoran Copper (of which 3 make us uncomfortable!) you should know about.
Of course Arizona Sonoran Copper may not be the best stock to buy. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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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