Here's Why We're Not Too Worried About Pecoy Copper's (CVE:PCU) Cash Burn Situation
Just because a business does not make any money, does not mean that the stock will go down. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.
So, the natural question for Pecoy Copper (CVE:PCU) shareholders is whether they should be concerned by its rate of cash burn. For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.
How Long Is Pecoy Copper's 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. Pecoy Copper has such a small amount of debt that we'll set it aside, and focus on the CA$145k in cash it held at July 2025. Importantly, its cash burn was CA$155k over the trailing twelve months. So it had a cash runway of approximately 11 months from July 2025. To be frank, this kind of short runway puts us on edge, as it indicates the company must reduce its cash burn significantly, or else raise cash imminently. Depicted below, you can see how its cash holdings have changed over time.
View our latest analysis for Pecoy Copper
How Hard Would It Be For Pecoy Copper To Raise More Cash For Growth?
Companies can raise capital through either debt or equity. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.
Since it has a market capitalisation of CA$218m, Pecoy Copper's CA$155k in cash burn equates to about 0.07% of its market value. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.
Is Pecoy Copper's Cash Burn A Worry?
Given it's an early stage company, we don't have a lot of data with which to judge Pecoy Copper's cash burn. We would undoubtedly be more comfortable if it had reported some operating revenue. However, it is fair to say that its cash burn relative to its market cap gave us comfort. While cash burning companies are always comparatively risky, we think its cash burn situation seems ok, on balance. Readers need to have a sound understanding of business risks before investing in a stock, and we've spotted 4 warning signs for Pecoy Copper that potential shareholders should take into account before putting money into a stock.
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.