Just because a business does not make any money, does not mean that the stock will go down. For example, although Amazon.com 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.
Given this risk, we thought we’d take a look at whether Southern Palladium (ASX:SPD) shareholders should be worried about its cash burn. In this report, we will consider the company’s annual negative free cash flow, henceforth referring to it as the ‘cash burn’. Let’s start with an examination of the business’ cash, relative to its cash burn.
Does Southern Palladium Have A Long Cash Runway?
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 June 2026, Southern Palladium had AU$24m in cash, and was debt-free. Looking at the last year, the company burnt through AU$2.0m. That means it had a cash runway of very many years as of June 2026. While this is only one measure of its cash burn situation, it certainly gives us the impression that holders have nothing to worry about. You can see how its cash balance has changed over time in the image below.
View our latest analysis for Southern Palladium
How Is Southern Palladium’s Cash Burn Changing Over Time?
Because Southern Palladium isn’t currently generating revenue, we consider it an early-stage 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 71%. Oftentimes, increased cash burn simply means a company is accelerating its business development, but one should always be mindful that this causes the cash runway to shrink. Admittedly, we’re a bit cautious of Southern Palladium due to its lack of significant operating revenues. We prefer most of the stocks on this list of stocks that analysts expect to grow.
How Hard Would It Be For Southern Palladium To Raise More Cash For Growth?
Given its cash burn trajectory, Southern Palladium shareholders may wish to consider how easily it could raise more cash, despite its solid cash runway. 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. 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 AU$234m, Southern Palladium’s AU$2.0m in cash burn equates to about 0.9% of its market value. So it could almost certainly just borrow a little to fund another year’s growth, or else easily raise the cash by issuing a few shares.
How Risky Is Southern Palladium’s Cash Burn Situation?
It may already be apparent to you that we’re relatively comfortable with the way Southern Palladium is burning through its cash. For example, we think its cash runway suggests that the company is on a good path. While its increasing cash burn wasn’t great, the other factors mentioned in this article more than make up for weakness on that measure. Looking at all the measures in this article, together, we’re not worried about its rate of cash burn; the company seems well on top of its medium-term spending needs. On another note, Southern Palladium has 3 warning signs (and 2 which are potentially serious) we think you should know about.
Of course Southern Palladium 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.
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