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We're Keeping An Eye On HeraMED's (ASX:HMD) Cash Burn Rate

Simply Wall St · 1d ago

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. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

So, the natural question for HeraMED (ASX:HMD) shareholders is whether they should be concerned by its rate of 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). Let's start with an examination of the business' cash, relative to its cash burn.

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How Long Is HeraMED's Cash Runway?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When HeraMED last reported its June 2026 balance sheet in August 2026, it had zero debt and cash worth AU$2.9m. In the last year, its cash burn was AU$3.2m. That means it had a cash runway of around 11 months as of June 2026. To be frank, this kind of short runway puts us on edge, as it indicates the company must reduce its cash burn significantly, or else raise cash imminently. The image below shows how its cash balance has been changing over the last few years.

debt-equity-history-analysis
ASX:HMD Debt to Equity History September 11th 2026

View our latest analysis for HeraMED

How Is HeraMED's Cash Burn Changing Over Time?

In the last year, HeraMED did book revenue of AU$330k, but its revenue from operations was less, at just AU$154k. Given how low that operating leverage is, we think it's too early to put much weight on the revenue growth, so we'll focus on how the cash burn is changing, instead. As it happens, the company's cash burn reduced by 20% over the last year, which suggests that management may be mindful of the risks of their depleting cash reserves. Admittedly, we're a bit cautious of HeraMED due to its lack of significant operating revenues. So we'd generally prefer stocks from this list of stocks that have analysts forecasting growth.

How Easily Can HeraMED Raise Cash?

While HeraMED is showing a solid reduction in its cash burn, it's still worth considering how easily it could raise more cash, even just to fuel 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. 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.

HeraMED's cash burn of AU$3.2m is about 8.4% of its AU$38m market capitalisation. Given that is a rather small percentage, it would probably be really easy for the company to fund another year's growth by issuing some new shares to investors, or even by taking out a loan.

How Risky Is HeraMED's Cash Burn Situation?

Even though its cash runway makes us a little nervous, we are compelled to mention that we thought HeraMED's cash burn relative to its market cap 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. Taking a deeper dive, we've spotted 3 warning signs for HeraMED you should be aware of, and 2 of them are potentially serious.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies with significant insider holdings, and this list of stocks growth stocks (according to analyst forecasts)