Companies Like NH3 Clean Energy (ASX:NH3) Are In A Position To Invest In Growth
Just because a business does not make any money, does not mean that the stock will go down. For example, NH3 Clean Energy (ASX:NH3) shareholders have done very well over the last year, with the share price soaring by 168%. But while history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?
So notwithstanding the buoyant share price, we think it's well worth asking whether NH3 Clean Energy's cash burn is too risky. In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.
Does NH3 Clean Energy Have A Long Cash Runway?
A company's cash runway is calculated by dividing its cash hoard by its cash burn. When NH3 Clean Energy last reported its December 2025 balance sheet in March 2026, it had zero debt and cash worth AU$2.7m. Looking at the last year, the company burnt through AU$2.0m. That means it had a cash runway of around 16 months as of December 2025. That's not too bad, but it's fair to say the end of the cash runway is in sight, unless cash burn reduces drastically. Depicted below, you can see how its cash holdings have changed over time.
See our latest analysis for NH3 Clean Energy
How Is NH3 Clean Energy's Cash Burn Changing Over Time?
Although NH3 Clean Energy reported revenue of AU$100 last year, it didn't actually have any revenue from operations. To us, that makes it a pre-revenue company, so we'll look to its cash burn trajectory as an assessment of its cash burn situation. As it happens, the company's cash burn reduced by 6.3% over the last year, which suggests that management are maintaining a fairly steady rate of business development, albeit with a slight decrease in spending. Admittedly, we're a bit cautious of NH3 Clean Energy due to its lack of significant operating revenues. We prefer most of the stocks on this list of stocks that analysts expect to grow.
How Easily Can NH3 Clean Energy Raise Cash?
While NH3 Clean Energy is showing a solid reduction in its cash burn, it's still worth considering how easily it could raise more cash, even just to fuel faster growth. Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).
NH3 Clean Energy's cash burn of AU$2.0m is about 2.6% of its AU$78m market capitalisation. So it could almost certainly just borrow a little to fund another year's growth, or else easily raise the cash by issuing a few shares.
So, Should We Worry About NH3 Clean Energy's Cash Burn?
The good news is that in our view NH3 Clean Energy's cash burn situation gives shareholders real reason for optimism. Not only was its cash runway quite good, but its cash burn relative to its market cap was a real positive. While we're the kind of investors who are always a bit concerned about the risks involved with cash burning companies, the metrics we have discussed in this article leave us relatively comfortable about NH3 Clean Energy's situation. Separately, we looked at different risks affecting the company and spotted 4 warning signs for NH3 Clean Energy (of which 1 doesn't sit too well with us!) you should know about.
Of course NH3 Clean Energy may not be the best stock to buy. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.
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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.