Debt Equity Historical Analysis

We hope Editas Medicine (NASDAQ:EDIT) will use its cash wisely

Even if a business loses money, shareholders have the potential to make money if they buy a good business at the right price. For example, while Amazon lost money for many years after going public, if you had bought and held these stocks since 1999, you would have made a fortune. But the harsh reality is that many loss-making companies burn through all their cash and go bankrupt.

Given this risk, we thought we should see whether Edit Medicine (NASDAQ: EDIT) Shareholders should be concerned about its cash burn. For the purposes of this article, we define cash burn as the amount of cash a company uses to fund its growth each year (also known as negative free cash flow). We’ll first compare its cash burn to its cash reserves to calculate its cash runway.

Check out our latest analysis for Editas Medicine

When will Editas Medicine run out of money?

A company’s cash runway is the time it takes to deplete its cash reserves at its current cash burn rate. As of June 2022, Editas Medicine had $453 million in cash and no debt. Last year, its cash burn was $171 million. So it has about 2.7 years of cash runway from June 2022. It can be said that this is a prudent and reasonable runway length. As you can see in the chart below, you can see how its cash holdings have changed over time.

NasdaqGS:EDIT Debt-to-Equity Swap History September 13, 2022

How is Editas Medicine going?

Overall, we think Editas Medicine has reduced cash burn by 9.9% over the trailing 12 months, which is a modest positive. But to our pessimism, operating income was down 61% at the time. Given these two metrics, we’re a little concerned about how the company is going. While the past is always worth studying, the most important is the future. So, you might want to see how much the company is expected to grow over the next few years.

How easy is it to raise cash for Editas Medicine?

While Editas Medicine appears to be growing its business well, we still wanted to consider whether it could easily raise more capital to accelerate growth. Generally, public companies can raise new cash by issuing stock 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 capitalization to see how much new shares a company must issue to fund a year of operations.

Editas Medicine, valued at $110 million, burned $171 million last year, or 16% of the company’s market value. Therefore, we take a risk that the company can raise more cash for growth without too much trouble, albeit at the cost of dilution.

What is the risk of Editas Medicine burning money?

In our analysis of Editas Medicine’s cash burn, we found its cash runway reassuring, while its revenue decline was a bit of a concern. A company that burns money is always on the riskier side, but after considering all the factors discussed in this short article, we’re not too concerned about its burn rate.Additionally, we looked at the different risks affecting companies and found 4 Warning Signs of Editas Medicine (1 of which could be serious!) You should know.

certainly, You may find a great investment by looking elsewhere. so look at this free List of companies insiders are buying, and this list of growth stocks (based on analyst forecasts)

This article by Simply Wall St is general in nature. We provide commentary based solely on historical data and analyst forecasts using an unbiased methodology and our articles are not intended to provide financial advice. It does not constitute advice to buy or sell any stock and does not take into account your objectives or your financial situation. Our goal is to bring you long-term focused analytics driven by fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Wall Street has no positions in any of the stocks mentioned.

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