Kura Sushi USA (NASDAQ:KRUS) Is In A Good Position To Deliver On Growth Plans

Simply Wall St · 03/13 10:40

There's no doubt that money can be made by owning shares of unprofitable businesses. 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.

Given this risk, we thought we'd take a look at whether Kura Sushi USA (NASDAQ:KRUS) shareholders should be worried about its cash burn. For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

See our latest analysis for Kura Sushi USA

How Long Is Kura Sushi USA's Cash Runway?

A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. As at November 2024, Kura Sushi USA had cash of US$108m and no debt. Looking at the last year, the company burnt through US$30m. So it had a cash runway of about 3.6 years from November 2024. A runway of this length affords the company the time and space it needs to develop the business. Importantly, if we extrapolate recent cash burn trends, the cash runway would be noticeably longer. Depicted below, you can see how its cash holdings have changed over time.

debt-equity-history-analysis
NasdaqGM:KRUS Debt to Equity History March 13th 2025

How Well Is Kura Sushi USA Growing?

At first glance it's a bit worrying to see that Kura Sushi USA actually boosted its cash burn by 41%, year on year. The silver lining is that revenue was up 26%, showing the business is growing at the top line. On balance, we'd say the company is improving over time. While the past is always worth studying, it is the future that matters most of all. So you might want to take a peek at how much the company is expected to grow in the next few years.

How Easily Can Kura Sushi USA Raise Cash?

There's no doubt Kura Sushi USA seems to be in a fairly good position, when it comes to managing its cash burn, but even if it's only hypothetical, it's always worth asking how easily it could raise more money to fund growth. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. 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.

Kura Sushi USA's cash burn of US$30m is about 4.6% of its US$650m market capitalisation. 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.

So, Should We Worry About Kura Sushi USA's Cash Burn?

It may already be apparent to you that we're relatively comfortable with the way Kura Sushi USA 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. Although its increasing cash burn does give us reason for pause, the other metrics we discussed in this article form a positive picture overall. Looking at all the measures in this article, together, we're not worried about its rate of cash burn; the company seems well on top of its medium-term spending needs. While we always like to monitor cash burn for early stage companies, qualitative factors such as the CEO pay can also shed light on the situation. Click here to see free what the Kura Sushi USA CEO is paid..

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