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 history lauds those rare successes, those that fail are often forgotten; who remembers Pets.com?

So should Kura Sushi USA (NASDAQ:KRUS) 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'. Let's start with an examination of the business' cash, relative to its cash burn.

Check out our latest analysis for Kura Sushi USA

When Might Kura Sushi USA Run Out Of Money?

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 May 2024, Kura Sushi USA had cash of US$61m and no debt. Looking at the last year, the company burnt through US$21m. That means it had a cash runway of about 2.9 years as of May 2024. That's decent, giving the company a couple years to develop its business. The image below shows how its cash balance has been changing over the last few years.

How Well Is Kura Sushi USA Growing?

Kura Sushi USA reduced its cash burn by 4.1% during the last year, which points to some degree of discipline. And considering that its operating revenue gained 30% during that period, that's great to see. Considering the factors above, the company doesn’t fare badly when it comes to assessing how it is changing over time. 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 Kura Sushi USA Raise More Cash Easily?

While Kura Sushi USA seems to be in a decent position, we reckon it is still worth thinking about how easily it could raise more cash, if that proved desirable. Companies can raise capital through either debt or equity. Many companies end up issuing new shares to fund future 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$21m is about 2.4% of its US$875m market capitalisation. That means it could easily issue a few shares to fund more growth, and might well be in a position to borrow cheaply.

Is Kura Sushi USA's Cash Burn A Worry?

As you can probably tell by now, we're not too worried about Kura Sushi USA's cash burn. In particular, we think its cash runway stands out as evidence that the company is well on top of its spending. On this analysis its cash burn reduction was its weakest feature, but we are not concerned about it. 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. Taking an in-depth view of risks, we've identified 2 warning signs for Kura Sushi USA that you should be aware of before investing.