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. By way of example, Southern Palladium (ASX:SPD) has seen its share price rise 426% over the last year, delighting many shareholders. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.
In light of its strong share price run, we think now is a good time to investigate how risky Southern Palladium’s cash burn is. In this report, we will consider the company’s annual negative free cash flow, henceforth referring to it as the ‘cash burn’. The first step is to compare its cash burn with its cash reserves, to give us its ‘cash runway’.
When Might Southern Palladium Run Out Of Money?
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. When Southern Palladium last reported its December 2025 balance sheet in March 2026, it had zero debt and cash worth AU$23m. In the last year, its cash burn was AU$1.6m. That means it had a cash runway of very many years as of December 2025. Even though this is but one measure of the company’s cash burn, the thought of such a long cash runway warms our bellies in a comforting way. 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?
Southern Palladium didn’t record any revenue over the last year, indicating that it’s an early stage company still developing its business. So while we can’t look to sales to understand growth, we can look at how the cash burn is changing to understand how expenditure is trending over time. With the cash burn rate up 49% in the last year, it seems that the company is ratcheting up investment in the business over time. That’s not necessarily a bad thing, but investors should be mindful of the fact that will shorten the cash runway. Southern Palladium makes us a little nervous due to its lack of substantial operating revenue. So we’d generally prefer stocks from this list of stocks that have analysts forecasting growth.
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. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Commonly, a business will sell new shares in itself to raise cash and drive 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.
Southern Palladium’s cash burn of AU$1.6m is about 0.8% of its AU$205m market capitalisation. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.
So, Should We Worry About Southern Palladium’s Cash Burn?
It may already be apparent to you that we’re relatively comfortable with the way Southern Palladium 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 increasing cash burn 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. On another note, we conducted an in-depth investigation of the company, and identified 4 warning signs for Southern Palladium (3 don’t sit too well with us!) 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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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.