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Companies Like HUYA (NYSE:HUYA) Are In A Position To Invest In Growth

Simply Wall St · 06/10 10:02

There's no doubt that money can be made by owning shares of unprofitable businesses. For example, although Amazon.com made 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 lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

So should HUYA (NYSE:HUYA) 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. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

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How Long Is HUYA's Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When HUYA last reported its March 2025 balance sheet in May 2025, it had zero debt and cash worth CN¥5.3b. In the last year, its cash burn was CN¥116m. So it had a very long cash runway of many years from March 2025. 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.

debt-equity-history-analysis
NYSE:HUYA Debt to Equity History June 10th 2025

See our latest analysis for HUYA

How Well Is HUYA Growing?

We reckon the fact that HUYA managed to shrink its cash burn by 23% over the last year is rather encouraging. Unfortunately, however, operating revenue declined by 6.9% during the period. Considering both these factors, we're not particularly excited by its growth profile. While the past is always worth studying, it is the future that matters most of all. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

Can HUYA Raise More Cash Easily?

There's no doubt HUYA 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. Companies can raise capital through either debt or equity. Many companies end up issuing new shares to fund future growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.

Since it has a market capitalisation of CN¥6.5b, HUYA's CN¥116m in cash burn equates to about 1.8% of its market value. 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.

How Risky Is HUYA's Cash Burn Situation?

It may already be apparent to you that we're relatively comfortable with the way HUYA is burning through its cash. For example, we think its cash runway suggests that the company is on a good path. Although its falling revenue 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. For us, it's always important to consider risks around cash burn rates. But investors should look at a whole range of factors when researching a new stock. For example, it could be interesting to see how much the HUYA CEO receives in total remuneration.

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