We're Not Very Worried About DigitalX's (ASX:DCC) Cash Burn Rate
Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.
So should DigitalX (ASX:DCC) shareholders be worried about its 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. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.
When Might DigitalX 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 June 2026, DigitalX had AU$24m in cash, and was debt-free. In the last year, its cash burn was AU$1.8m. That means it had a cash runway of very many years as of June 2026. While this is only one measure of its cash burn situation, it certainly gives us the impression that holders have nothing to worry about. Depicted below, you can see how its cash holdings have changed over time.
Check out our latest analysis for DigitalX
How Well Is DigitalX Growing?
Happily, DigitalX is travelling in the right direction when it comes to its cash burn, which is down 58% over the last year. Unfortunately, however, operating revenue dropped 5.1% during the same time frame. On balance, we'd say the company is improving over time. Of course, we've only taken a quick look at the stock's growth metrics, here. You can take a look at how DigitalX has developed its business over time by checking this visualization of its revenue and earnings history.
How Hard Would It Be For DigitalX To Raise More Cash For Growth?
We are certainly impressed with the progress DigitalX has made over the last year, but it is also worth considering how costly it would be if it wanted to raise more cash to fund faster growth. 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 AU$49m, DigitalX's AU$1.8m in cash burn equates to about 3.7% of its market value. That's a low proportion, so we figure the company would be able to raise more cash to fund growth, with a little dilution, or even to simply borrow some money.
Is DigitalX's Cash Burn A Worry?
It may already be apparent to you that we're relatively comfortable with the way DigitalX is burning through its cash. In particular, we think its cash runway stands out as evidence that the company is well on top of its spending. While its falling revenue wasn't great, the other factors mentioned in this article more than make up for weakness on that measure. After taking into account the various metrics mentioned in this report, we're pretty comfortable with how the company is spending its cash, as it seems on track to meet its needs over the medium term. Taking a deeper dive, we've spotted 3 warning signs for DigitalX you should be aware of, and 1 of them is concerning.
If you would prefer to check out another company with better fundamentals, then do not miss this free list of interesting companies, that have HIGH return on equity and low debt or this list of stocks which are all forecast to grow.
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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.