Is RAPT Therapeutics (NASDAQ:RAPT) In A Good Position To Invest In Growth?
Given this risk, we thought we'd take a look at whether RAPT Therapeutics (NASDAQ:RAPT) shareholders should be worried about its cash burn. In this article, we define cash burn as its annual (negative) free cash flow, which is the amount of money a company spends each year to fund its growth. Let's start with an examination of the business' cash, relative to its cash burn.
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A company's cash runway is calculated by dividing its cash hoard by its cash burn. When RAPT Therapeutics last reported its December 2024 balance sheet in March 2025, it had zero debt and cash worth US$231m. Looking at the last year, the company burnt through US$83m. So it had a cash runway of about 2.8 years from December 2024. Arguably, that's a prudent and sensible length of runway to have. You can see how its cash balance has changed over time in the image below.
See our latest analysis for RAPT Therapeutics
Because RAPT Therapeutics 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 15% it seems management feel the company is spending enough to advance its business plans at an appropriate pace. 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.
While RAPT Therapeutics 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. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. 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).
Since it has a market capitalisation of US$106m, RAPT Therapeutics' US$83m in cash burn equates to about 79% of its market value. That's very high expenditure relative to the company's size, suggesting it is an extremely high risk stock.
Even though its cash burn relative to its market cap makes us a little nervous, we are compelled to mention that we thought RAPT Therapeutics' cash runway was relatively promising. Even though we don't think it has a problem with its cash burn, the analysis we've done in this article does suggest that shareholders should give some careful thought to the potential cost of raising more money in the future. On another note, we conducted an in-depth investigation of the company, and identified 5 warning signs for RAPT Therapeutics (3 don't sit too well with us!) that you should be aware of before investing here.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies with significant insider holdings, and this list of stocks growth stocks (according to analyst forecasts)
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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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