AGTech Holdings (HKG: 8279) is well positioned to deliver on its growth plans
There is no doubt that money can be made by owning shares of unprofitable companies. For example, although Amazon.com suffered losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. But while history praises these rare successes, those that fail are often forgotten; who remembers Pets.com?
So should AGTech Holdings (HKG: 8279) Are shareholders worried about its consumption of cash? In this article, we define cash consumption as its annual (negative) free cash flow, that is, the amount that a company spends each year to finance its growth. We will start by comparing its cash consumption with its cash reserves in order to calculate its cash flow track.
Check out our latest analysis for AGTech Holdings
How long is AGTech Holdings’ treasury trail?
A company’s cash flow trail is calculated by dividing its cash reserve by its cash consumption. As of December 2020, AGTech Holdings had HK $ 1.7 billion in cash and no debt. In the past year, his cash consumption was HK $ 99 million. This means that he had a very many years cash trail as of December 2020. Even though this is only a measure of the company’s cash consumption, the idea of ââa cash trail this long warms our stomachs in a comforting way. You can see how her cash balance has changed over time in the image below.
How is AGTech Holdings growing?
It was quite positive to see that AGTech Holdings reduced its cash consumption by 42% over the past year. However, operating revenues have been essentially stable during this period. Overall, we would say the business is improving over time. In reality, this article does only a brief study of company growth data. You can take a look at how AGTech Holdings has grown its business over time by checking out this historical revenue and profit visualization.
Would it be difficult for AGTech Holdings to raise more cash for growth?
We’re certainly impressed with the progress AGTech Holdings has made over the past year, but it’s also worth considering how expensive it would be to raise more cash to fund faster growth. Businesses can raise capital through debt or equity. Usually, a company will sell new stocks on its own to raise funds and stimulate growth. By looking at a company’s cash consumption relative to its market capitalization, we get an idea of ââhow many shareholders would be diluted if the company needed to raise enough cash to cover another’s cash consumption. year.
AGTech Holdings has a market capitalization of HK $ 3.2 billion and spent HK $ 99 million last year, or 3.1% of the company’s market value. Given that this is a rather small percentage, it would probably be very easy for the company to finance the growth of another year by issuing new shares to investors, or even taking out a loan.
Is AGTech Holdings cash burn a concern?
As you can probably see by now, we’re not too worried about AGTech Holdings’ liquidity consumption. For example, we think his cash flow trail suggests the business is on the right track. Its weak point is the growth of its turnover, but even that was not so bad! Looking at all of the metrics in this article, together, we’re not worried about its rate of cash consumption; the business appears to be well above its medium-term spending needs. On another note, AGTech Holdings has 2 warning signs (and 1 which is a bit rude) we think you should be aware of.
Sure, you might find a fantastic investment looking elsewhere. So take a look at this free list of interesting companies, and this list of growth stocks (according to analysts’ forecasts)
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