Here’s Why We’re Not Too Worried About CoTec Holdings’ (CVE:CTH) Cash Burn Situation

There’s no doubt that money can be made by owning shares of unprofitable businesses. By way of example, CoTec Holdings (CVE:CTH) has seen its share price rise 220% over the last year, delighting many shareholders. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

Given its strong share price performance, we think it’s worthwhile for CoTec Holdings shareholders to consider whether its cash burn is concerning. 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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How Long Is CoTec Holdings’ Cash Runway?

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. CoTec Holdings has such a small amount of debt that we’ll set it aside, and focus on the CA$5.8m in cash it held at September 2025. Importantly, its cash burn was CA$4.1m over the trailing twelve months. That means it had a cash runway of around 17 months as of September 2025. 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. The image below shows how its cash balance has been changing over the last few years.

See our latest analysis for CoTec Holdings

How Is CoTec Holdings’ Cash Burn Changing Over Time?

CoTec Holdings didn’t record any revenue over the last year, indicating that it’s an early stage company still developing its 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. Over the last year its cash burn actually increased by 8.2%, which suggests that management are increasing investment in future growth, but not too quickly. That’s not necessarily a bad thing, but investors should be mindful of the fact that will shorten the cash runway. CoTec Holdings makes us a little nervous due to its lack of substantial operating revenue. So we’d generally prefer stocks from this list of stocks that have analysts forecasting growth.

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

While its cash burn is only increasing slightly, CoTec Holdings shareholders should still consider the potential need for further cash, down the track. Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive 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).

CoTec Holdings’ cash burn of CA$4.1m is about 2.7% of its CA$152m 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.

How Risky Is CoTec Holdings’ Cash Burn Situation?

Even though its increasing cash burn makes us a little nervous, we are compelled to mention that we thought CoTec Holdings’ cash burn relative to its market cap was relatively promising. Cash burning companies are always on the riskier side of things, but after considering all of the factors discussed in this short piece, we’re not too worried about its rate of cash burn. Taking an in-depth view of risks, we’ve identified 3 warning signs for CoTec Holdings that you should be aware of before investing.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.