16-05-2025
Companies Like Rapport Therapeutics (NASDAQ:RAPP) Are In A Position To Invest In Growth
Just because a business does not make any money, does not mean that the stock will go down. For example, although made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.
So should Rapport Therapeutics (NASDAQ:RAPP) 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. Let's start with an examination of the business' cash, relative to its cash burn.
We've discovered 4 warning signs about Rapport Therapeutics. View them for free.
A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. In March 2025, Rapport Therapeutics had US$285m in cash, and was debt-free. Importantly, its cash burn was US$69m over the trailing twelve months. That means it had a cash runway of about 4.1 years as of March 2025. A runway of this length affords the company the time and space it needs to develop the business. The image below shows how its cash balance has been changing over the last few years.
View our latest analysis for Rapport Therapeutics
Rapport Therapeutics 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. Over the last year its cash burn actually increased by a very significant 62%. While this spending increase is no doubt intended to drive growth, if the trend continues the company's cash runway will shrink very quickly. Clearly, however, the crucial factor is whether the company will grow its business going forward. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.
Given its cash burn trajectory, Rapport Therapeutics shareholders may wish to consider how easily it could raise more cash, despite its solid cash runway. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.
Since it has a market capitalisation of US$351m, Rapport Therapeutics' US$69m in cash burn equates to about 20% of its market value. 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.
On this analysis of Rapport Therapeutics' cash burn, we think its cash runway was reassuring, while its increasing cash burn has us a bit worried. Considering all the factors discussed in this article, we're not overly concerned about the company's cash burn, although we do think shareholders should keep an eye on how it develops. On another note, we conducted an in-depth investigation of the company, and identified 4 warning signs for Rapport Therapeutics (3 can't be ignored!) that you should be aware of before investing here.
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)
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