is amarin stock a good buy
is amarin stock a good buy
Here's Why We're Not Too Worried About Amarin's (NASDAQ:AMRN) Cash Burn Situation
Does Amarin Have A Long Cash Runway?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. When Amarin last reported its September 2024 balance sheet in October 2024, it had zero debt and cash worth US$306m. In the last year, its cash burn was US$19m. That means it had a cash runway of very many years as of September 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. The image below shows how its cash balance has been changing over the last few years.
Is Amarin's Revenue Growing?
Given that Amarin actually had positive free cash flow last year, before burning cash this year, we'll focus on its operating revenue to get a measure of the business trajectory. Regrettably, the company's operating revenue moved in the wrong direction over the last twelve months, declining by 25%. 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.
How Hard Would It Be For Amarin To Raise More Cash For Growth?
Since its revenue growth is moving in the wrong direction, Amarin shareholders may wish to think ahead to when the company may need to raise more cash. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. 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$242m, Amarin's US$19m in cash burn equates to about 7.8% 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.
So, Should We Worry About Amarin's Cash Burn?
It may already be apparent to you that we're relatively comfortable with the way Amarin is burning through its cash. In particular, we think its cash runway stands out as evidence that the company is well on top of its spending. While its falling revenue wasn't great, the other factors mentioned in this article more than make up for weakness on that measure. After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash, as it seems on track to meet its needs over the medium term.
Does Amarin Have A Long Cash Runway?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. When Amarin last reported its September 2024 balance sheet in October 2024, it had zero debt and cash worth US$306m. In the last year, its cash burn was US$19m. That means it had a cash runway of very many years as of September 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. The image below shows how its cash balance has been changing over the last few years.
Is Amarin's Revenue Growing?
Given that Amarin actually had positive free cash flow last year, before burning cash this year, we'll focus on its operating revenue to get a measure of the business trajectory. Regrettably, the company's operating revenue moved in the wrong direction over the last twelve months, declining by 25%. 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.
How Hard Would It Be For Amarin To Raise More Cash For Growth?
Since its revenue growth is moving in the wrong direction, Amarin shareholders may wish to think ahead to when the company may need to raise more cash. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. 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$242m, Amarin's US$19m in cash burn equates to about 7.8% 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.
So, Should We Worry About Amarin's Cash Burn?
It may already be apparent to you that we're relatively comfortable with the way Amarin is burning through its cash. In particular, we think its cash runway stands out as evidence that the company is well on top of its spending. While its falling revenue wasn't great, the other factors mentioned in this article more than make up for weakness on that measure. After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash, as it seems on track to meet its needs over the medium term.