Will Kingmaker Footwear Holdings (HKG:1170) Spend Its Cash Wisely?
Just because a business does not make any money, does not mean that the stock will go down. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.
So should Kingmaker Footwear Holdings (HKG:1170) shareholders be worried about its cash burn? 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. Let's start with an examination of the business' cash, relative to its cash burn.
When Might Kingmaker Footwear Holdings Run Out Of Money?
A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. In March 2026, Kingmaker Footwear Holdings had HK$299m in cash, and was debt-free. In the last year, its cash burn was HK$57m. So it had a cash runway of about 5.3 years from March 2026. Even though this is but one measure of the company's cash burn, the thought of such a long cash runway warms our bellies in a comforting way. You can see how its cash balance has changed over time in the image below.
See our latest analysis for Kingmaker Footwear Holdings
How Well Is Kingmaker Footwear Holdings Growing?
One thing for shareholders to keep front in mind is that Kingmaker Footwear Holdings increased its cash burn by 567% in the last twelve months. While that's concerning on it's own, the fact that operating revenue was actually down 3.0% over the same period makes us positively tremulous. In light of the above-mentioned, we're pretty wary of the trajectory the company seems to be on. In reality, this article only makes a short study of the company's growth data. This graph of historic earnings and revenue shows how Kingmaker Footwear Holdings is building its business over time.
How Hard Would It Be For Kingmaker Footwear Holdings To Raise More Cash For Growth?
Kingmaker Footwear Holdings seems to be in a fairly good position, in terms of cash burn, but we still think it's worthwhile considering how easily it could raise more money if it wanted to. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Many companies end up issuing new shares to fund future 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 HK$291m, Kingmaker Footwear Holdings' HK$57m in cash burn equates to about 20% of its market value. As a result, we'd venture that the company could raise more cash for growth without much trouble, albeit at the cost of some dilution.
So, Should We Worry About Kingmaker Footwear Holdings' Cash Burn?
Even though its increasing cash burn makes us a little nervous, we are compelled to mention that we thought Kingmaker Footwear Holdings' cash runway was relatively promising. Even though we don't think it has a problem with its cash burn, the analysis we've done in this article does suggest that shareholders should give some careful thought to the potential cost of raising more money in the future. On another note, Kingmaker Footwear Holdings has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.
Of course Kingmaker Footwear Holdings 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.