We don’t worry about Tango Therapeutics’ (NASDAQ.TNGX) cash burn rate

Investors are attracted to non-profitable companies. This is why we can easily understand why. Biotech and mining exploration companies, for example, often lose their money for many years before they find success with new treatments or discoveries. Unprofitable companies can be risky as they can lose all their cash and become financially unstable.

We thought it was worth taking a look at the possibility of this happening. Tango Therapeutics (NASDAQ:TNGXIts cash burn should concern () shareholders. We will define cash burn as the company’s annual (negatively) free cash flow. This is the money that a company uses each year to finance its growth. To determine its cash runway, we need to first compare the cash burn to its cash reserves.

See our latest analysis for Tango Therapeutics

How long is Tango Therapeutics’ cash runway?

The cash runway is the time it would take for a company’s cash to run dry if it continued spending at its current cash burn rate. Tango Therapeutics was cash-free and had US$393m left over in September 2022. The most important thing is that Tango Therapeutics’ cash burn was US$105m in the twelve preceding months. It had a cash runway of approximately 3.7 years as of September 20,22. This runway is impressive and reassuring. The image below shows how the cash balance has changed over the years.

How well is Tango Therapeutics growing in the United States?

Tango Therapeutics increased investment by 69% in the past year. Cash burn rose by 69%. This is a worrying statistic on its own but the fact that operating revenues were down 40% in the same time period makes us extremely tremulous. We find these growth metrics a little alarming when taken together. The future is more important than the past. It makes sense to look at the future. our analyst forecasts for the company.

How Easy Can Tango Therapeutics Raaise Cash?

Although Tango Therapeutics appears to be in a good place, it is worth considering how it could raise additional cash to help fuel its growth. A listed company can raise money by issuing new shares or taking on more debt. To fund future growth, many companies issue new shares. If a company has a high cash burn relative its market capitalisation, it can give us insight into how many shareholders would be affected by the need to raise additional cash.

Tango Therapeutics’ cash burn of US$105m is approximately 16% of its market capitalization, which amounts to US$662m. Therefore, we believe the company could raise cash more easily for growth, even if it had to dilution some.

Do We Have to Worry about Tango Therapeutics’ Cash Burns?

This analysis of Tango Therapeutics cash burn shows that its cash runway was encouraging, but its falling revenue makes us nervous. Although we are the type of investors that are concerned about cash-burning companies’ risks, we feel relatively confident about Tango Therapeutics’ situation based on the metrics discussed in this article. We also looked at other risks that could affect the company, and we spotted 2 warning signs for Tango Therapeutics (of which 1 is worrying!) You should be aware of.

You can, of course. It is possible to find a great investment opportunity by looking elsewhere. Have a look at this No cost list of companies insiders are buying, And this list of stocks growth stocks (according to analyst forecasts)

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This article is by Simply Wall St. It is general in nature. Our commentary is based on historical data, analyst forecasts and other unbiased information. We do not intend to provide financial advice. This analysis does not represent a recommendation to purchase or sell any stock and it does not consider your objectives or financial situation. Our aim is to give you long-term focused analysis that is based on fundamental data. Please note that our analysis might not include the latest announcements from price-sensitive companies or qualitative material. Simply Wall St does not hold any position in the stocks mentioned.

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