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Here's Why We're Watching VHM's (ASX:VHM) Cash Burn Situation

Simply Wall St · 1d ago

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 the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

So should VHM (ASX:VHM) shareholders be worried about its cash burn? In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

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Does VHM Have A Long Cash Runway?

You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. VHM has such a small amount of debt that we'll set it aside, and focus on the AU$13m in cash it held at June 2026. In the last year, its cash burn was AU$10m. Therefore, from June 2026 it had roughly 15 months of cash runway. While that cash runway isn't too concerning, sensible holders would be peering into the distance, and considering what happens if the company runs out of cash. Depicted below, you can see how its cash holdings have changed over time.

debt-equity-history-analysis
ASX:VHM Debt to Equity History September 22nd 2026

See our latest analysis for VHM

How Is VHM's Cash Burn Changing Over Time?

VHM didn't record any revenue over the last year, indicating that it's an early stage company still developing its business. Nonetheless, we can still examine its cash burn trajectory as part of our assessment of its cash burn situation. As it happens, the company's cash burn reduced by 11% over the last year, which suggests that management are maintaining a fairly steady rate of business development, albeit with a slight decrease in spending. VHM makes us a little nervous due to its lack of substantial operating revenue. We prefer most of the stocks on this list of stocks that analysts expect to grow.

How Hard Would It Be For VHM To Raise More Cash For Growth?

While VHM 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. Companies can raise capital through either debt or equity. Many companies end up issuing new shares to fund future growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).

Since it has a market capitalisation of AU$70m, VHM's AU$10m in cash burn equates to about 14% of its market value. As a result, we'd venture that the company could raise more cash for growth without much trouble, albeit at the cost of some dilution.

Is VHM's Cash Burn A Worry?

VHM appears to be in pretty good health when it comes to its cash burn situation. One the one hand we have its solid cash runway, while on the other it can also boast very strong cash burn relative to its market cap. 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. Separately, we looked at different risks affecting the company and spotted 3 warning signs for VHM (of which 1 is a bit unpleasant!) you should know about.

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)