Li-S Energy (ASX:LIS) Is In A Good Position To Deliver On Growth Plans

Just because a business does not make any money, does not mean that the stock will go down. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. But the harsh reality is that very many loss making companies burn through all their cash and go bankrupt.

So should Li-S Energy (ASX:LIS) 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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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 Li-S Energy last reported its December 2024 balance sheet in February 2025, it had zero debt and cash worth AU$20m. Looking at the last year, the company burnt through AU$9.1m. Therefore, from December 2024 it had 2.2 years of cash runway. That’s decent, giving the company a couple years to develop its business. Depicted below, you can see how its cash holdings have changed over time.

ASX:LIS Debt to Equity History June 3rd 2025

Check out our latest analysis for Li-S Energy

Because Li-S Energy isn’t currently generating revenue, we consider it an early-stage business. So while we can’t look to sales to understand growth, we can look at how the cash burn is changing to understand how expenditure is trending over time. With cash burn dropping by 8.5% it seems management feel the company is spending enough to advance its business plans at an appropriate pace. Li-S Energy 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.

While Li-S Energy 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 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.