Will Nkarta (NASDAQ:NKTX) Spend Its Cash Wisely?
Just because a business does not make any money, does not mean that the stock will go down. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. 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 Nkarta (NASDAQ:NKTX) 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). We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.
When Might Nkarta Run Out Of Money?
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. When Nkarta last reported its June 2026 balance sheet in August 2026, it had zero debt and cash worth US$183m. Importantly, its cash burn was US$94m over the trailing twelve months. That means it had a cash runway of around 23 months as of June 2026. That's not too bad, but it's fair to say the end of the cash runway is in sight, unless cash burn reduces drastically. You can see how its cash balance has changed over time in the image below.
See our latest analysis for Nkarta
How Is Nkarta's Cash Burn Changing Over Time?
Nkarta 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 6.3% over the last year, which suggests that management are maintaining a fairly steady rate of business development, albeit with a slight decrease in spending. 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 Nkarta Raise More Cash Easily?
While Nkarta 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. 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.
Nkarta has a market capitalisation of US$119m and burnt through US$94m last year, which is 79% of the company's market value. That's very high expenditure relative to the company's size, suggesting it is an extremely high risk stock.
So, Should We Worry About Nkarta's Cash Burn?
On this analysis of Nkarta's cash burn, we think its cash runway was reassuring, while its cash burn relative to its market cap has us a bit worried. Looking at the factors mentioned in this short report, we do think that its cash burn is a bit risky, and it does make us slightly nervous about the stock. On another note, Nkarta has 3 warning signs (and 2 which don't sit too well with us) we think you should know about.
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