Will Sangamo Therapeutics (NASDAQ:SGMO) spend its money wisely?


We can easily understand why investors are attracted to unprofitable companies. For example, although Amazon.com posted losses for many years after it listed, if you had bought and held the stock since 1999, you would have made a fortune. But while the success stories are well known, investors shouldn’t ignore the many, many unprofitable companies that simply burn all their money and crash.

So should Therapeutic Sangamo (NASDAQ:SGMO) Are shareholders worried about its cash burn? In this report, we will consider the company’s annual negative free cash flow, which we will now refer to as “cash burn”. Let’s start with a review of the company’s cash flow, relative to its cash burn.

See our latest review for Sangamo Therapeutics

How long is the Sangamo Therapeutics cash trail?

A company’s cash trail is calculated by dividing its cash hoard by its cash burn. When Sangamo Therapeutics last released its balance sheet in December 2021, it had no debt and cash worth $377 million. Last year, its cash burn was $257 million. It therefore had a cash trail of approximately 18 months from December 2021. Importantly, analysts believe that Sangamo Therapeutics will break even in 4 years. Essentially, this means the business will reduce its cash burn or need more cash. The image below shows how his cash balance has changed over the past few years.

NasdaqGS: SGMO Debt to Equity History April 11, 2022

Are Sangamo Therapeutics revenue growing?

Since Sangamo Therapeutics actually had positive free cash flow last year, before burning cash this year, we will focus on its operating revenue to get a measure of business trajectory. Unfortunately, the company’s operating revenue has moved in the wrong direction over the past twelve months, down 6.3%. While the past is always worth studying, it is the future that matters most. You might want to take a look at the company’s expected growth over the next few years.

Can Sangamo Therapeutics raise more money easily?

Given its problematic revenue decline, Sangamo Therapeutics shareholders should consider how the company could fund its growth, should it need more cash. In general, a listed company can raise new funds by issuing shares or by going into debt. Typically, a company will sell new stock on its own to raise cash and drive growth. By looking at a company’s cash burn relative to its market capitalization, we gain insight into how much of a shareholder base would be diluted if the company needed to raise enough cash to cover a company’s cash burn. another year.

Sangamo Therapeutics’ cash burn of US$257 million represents approximately 31% of its market capitalization of US$835 million. This is not trivial, and if the company were to sell enough stock to fund another year’s growth at the current share price, you would likely see some pretty costly dilution.

So should we be worried about Sangamo Therapeutics’ cash burn?

On this analysis of Sangamo Therapeutics’ cash burn, we think its cash trail was reassuring, while its cash burn relative to its market cap worries us a bit. Shareholders can rejoice that analysts predict it will break even. While we don’t think it has a problem with its cash burn, the analysis we’ve done in this article suggests that shareholders should think carefully about the potential cost of raising more money in the future. A thorough examination of the risks revealed 3 warning signs for Sangamo Therapeutics readers should consider before committing capital to this title.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.


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