We can readily understand why investors are attracted to unprofitable companies. For example, Metal Powder Works (ASX:MPW) shareholders have done very well over the last year, with the share price soaring by 397%. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

In light of its strong share price run, we think now is a good time to investigate how risky Metal Powder Works' cash burn is. In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. First, we'll determine its cash runway by comparing its cash burn with its cash reserves.

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How Long Is Metal Powder Works' 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. In December 2025, Metal Powder Works had AU$15m in cash, and was debt-free. In the last year, its cash burn was AU$6.2m. That means it had a cash runway of about 2.5 years as of December 2025. Notably, however, the one analyst we see covering the stock thinks that Metal Powder Works will break even (at a free cash flow level) before then. In that case, it may never reach the end of its cash runway. You can see how its cash balance has changed over time in the image below.ASX:MPW Debt to Equity History March 29th 2026

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How Is Metal Powder Works' Cash Burn Changing Over Time?

Whilst it's great to see that Metal Powder Works has already begun generating revenue from operations, last year it only produced AU$2.7m, so we don't think it is generating significant revenue, at this point. As a result, we think it's a bit early to focus on the revenue growth, so we'll limit ourselves to looking at how the cash burn is changing over time. Remarkably, it actually increased its cash burn by 385% in the last year. Given that sharp increase in spending, the company's cash runway will shrink rapidly as it depletes its cash reserves. Clearly, however, the crucial factor is whether the company will grow its business going forward. So you might want to take a peek at how much the company is expected to grow in the next few years.

Can Metal Powder Works Raise More Cash Easily?

Given its cash burn trajectory, Metal Powder Works shareholders may wish to consider how easily it could raise more cash, despite its solid cash runway. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. 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.

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Metal Powder Works has a market capitalisation of AU$281m and burnt through AU$6.2m last year, which is 2.2% of the company's market value. So it could almost certainly just borrow a little to fund another year's growth, or else easily raise the cash by issuing a few shares.

How Risky Is Metal Powder Works' Cash Burn Situation?

It may already be apparent to you that we're relatively comfortable with the way Metal Powder Works is burning through its cash. In particular, we think its cash burn relative to its market cap stands out as evidence that the company is well on top of its spending. While we must concede that its increasing cash burn is a bit worrying, the other factors mentioned in this article provide great comfort when it comes to the cash burn. Shareholders can take heart from the fact that at least one analyst is forecasting it will reach breakeven. 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. Readers need to have a sound understanding of business risks before investing in a stock, and we've spotted 1 warning sign for Metal Powder Works that potential shareholders should take into account before putting money into a stock.

Of course Metal Powder Works may not be the best stock to buy. So you may wish to see this freecollection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.

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